Additional City Civil and Sessions Court accepted Mr Chandy's application seeking annulment of an earlier order in which six respondents, including Mr Chandy and a firm, were directed to pay about Rs 1.61 crore to MK Kuruvilla, a Bengaluru-based industrialist.
In the interim application, Mr Chandy had stated that the order was ex-parte and his version was not heard.
Judge Patil Mohankumar Bheemanagouda acquitted Mr Chandy on the grounds of lack of evidence to prove he had any money transaction with Mr Kuruvilla.
"Even in the plaint that Kuruvilla had filed does not mention about Rs 1.61 crore changing hands between him and Chandy, and therefore, taking this premise into cognisance this honourable court acquits Chandy in the case," the judge said in his order.
However, the judge said the court will continue proceedings against other five accused, who allegedly did not give money to Mr Kuruvilla.
Mr Kuruvilla had filed a civil petition in 2015 seeking to return of Rs 1,60,85,700 deposited with SCOSSA Educational Consultants Private Limited, the first defendant, for setting up a solar power project in Kerala.
According to Mr Kuruvilla, in 2011, he became acquainted with Mr Binu Nair who claimed to be the Director of Kochi-based SCOSSA.
The petition stated that Nair had claimed that one of the directors of SCOSSA, Andrews, was Mr Chandy's first cousin and would be appointed consultant to the project and that he would operate from Abu Dhabi.
Mr Kuruvilla had also submitted that Mr Nair had named a Mr Diljith as another director of SCOSSA who he claimed was the private secretary to Mr Chandy and contended that the former Chief Minister too was jointly liable to return his money.
On October 24 last, the court had directed six persons, including Mr Chandy, and a firm to together to pay Rs 1,60,85,700 to Mr Kuruvilla with 12 per cent interest per annum for a solar power project that did not materialise.
Mr Chandy had filed two applications appealing against the earlier verdict.
The first plea had challenged the court's ex-parte order and the second one sought that his arguments be heard.