Kalu Bharwad and Mayur Patel, residents of Naroda Gam, told judge P B Desai that they were standing near Narayan Chawl from where they saw the mob moving towards Kumbharwaas.
Kodnani and other nine persons among the accused whom they knew were not a part of this mob, the two witnesses said.
Kanu Bharwad, another defence witness who was examined today, said that several Muslim families fleeing the mob took shelter in Bharwadwaas locality behind his house.
Kanu Bharwad, however, said in his deposition that they could not have seen the killings, as they had taken shelter in Bharwadwaas for most part of February 28, 2002, the day the massacre took place.
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The hearing of the case would continue on Wednesday.
Naroda Gam is one of the nine riot cases from Gujarat which were investigated by the Supreme Court-appointed special investigation team.
Eleven people belonging to the minority community were killed in Naroda Gam, on the outskirts of Ahmedabad.