Point no 1) Whenever you create a DB, you have to specify the username and password. You can keep it both blank; But same username and password has to be used while connecting to server.
If you observe script file of your DB, you can see commands like :-
CREATE USER "usr" PASSWORD DIGEST '9003d1df22eb4d3820015070385194c8'
ALTER USER "usr" SET LOCAL TRUE
GRANT DBA TO "usr"
I had created DB with user name "usr" so it appeared in script file in those commands. Now while starting server I do not need to specify user name or password. It will IGNORE this information.
While connecting server you have to give exactly same username and password, you gave while creating DB.
Point no 2)
Make sure that there is no space in path of your DB files. If there is space then enclose the whole path in double quotes.
I struggled a lot to find out this silly mistake of mine.
Now if I start the server wil below command it starts correctly
1) Go to lib of HSQL
cd C:\Users\owner\Documents\Java Project\hsqldb-2.2.9\hsqldb\lib
Then give command
java -cp hsqldb.jar org.hsqldb.Server -database.0 file:"C:\Users\owner\Documents\Java Project\hsqldb-2.2.9\TmpDBLocation\myKauDB" -dbname.0 xdb
2) In other command prompt went to lib location
cd C:\Users\owner\Documents\Java Project\hsqldb-2.2.9\hsqldb\lib
Then connected the Swing UI of HSQL DB by giving command in other command prompt window
java -cp hsqldb.jar org.hsqldb.util.DatabaseManagerSwing --driver org.hsqldb.jdbcDriver --URL jdbc:hsqldb:hsql://localhost/xdb --user "usr" --password ""