Can you post a closer picture of the fish? But based on your description the sick fish probably has some battle damage from the aggression of the other Damsel. They can be mean little dudes! So the injured fish probably has a bacterial infection resulting from the wounds suffered. You'll need to pull it out into a QT to help it recover. Doesn't have to be a tank, could be a Rubbermaid container. But the most gentile treatment for it would be Ruby Reef Rally. It has both antiseptic and antibiotic qualities that will help the fish's immune system to recover.
From Humblefish's Treatment Advisory:
Bacterial infections:
Symptoms - Sometimes it's self-describing: Popeye/cloudy eyes, fin & tail rot, dropsy (bloated fish), etc. But some other bacterial infections, such as furunculosis, hemorrhagic septicemia, etc., can have varying visible symptoms. Any redness or open sores/wounds on a fish should be viewed with suspicion. Also, a white film or fungus-looking growth may denote a bacterial infection. It’s important to note that in many cases a bacterial infection is usually secondary in nature to a parasitic infestation such as ich, meaning if a fish has been battling ich for a while then his immune system has been lowered. This makes infection more likely for many opportunistic, harmful bacteria.
Treatment options - Broad spectrum antibiotic medication i.e. one that treats both gram-positive and gram-negative bacterial diseases. Examples of this include Furan-2, Kanamycin aka Seachem Kanaplex, Nitrofuracin Green Powder, Triple Sulfa Powder, or a combination of using both Erythromycin & Minocycline. The latter can be accomplished (albeit expensively) by using freshwater Maracyn 1 & 2 and then doubling the dosage for saltwater use. When
