"We had a process in place, it was their prerogative to get the clearance done. But now they will miss the tournament as they failed to get clearance from PCB," Modi added.
"We have informed the franchises about it so that they will look for a suitable replacement," he added.
Pakistani cricketers Umar Gul (Kolkata Knight Riders, Sohail Tanvir (Rajasthan Royals), Misbah-ul Haq (Royal Challengers Bangalore) and Kamran Akmal (Rajasthan Royals) have played in the first edition, while Knight Riders were in talks with Abdul Razzaq.
Other Pakistani cricketers like all-rounder Shahid Afridi, spinner Saeed Ajmal and pacer Mohammad Aamer were expected to join various franchises in the IPL III.
The transfer window is opening on Wednesday, while December 11 is the last date for teams to file expression of interest for players.High Court stops ICL from filing suit against BCCI in U.K.
Earlier, Modi met Knight Riders' officials including team co-owner Jay Mehta, CAB chief Jagmohan Dalmiya and inspected Eden Gardens, which will host the home matches of the Kolkata team.
With Eden Gardens undergoing major renovation to meet the ICC World Cup 2011 deadline, about 40,000 seats will be closed to the spectators.
"This will be for one season. We will have to make some sacrifice to meet our objective which is to increase capacity and viewing experience," Modi said.
With the reduced capacity, the CAB will have to be content with a lesser quota in accordance with the 20 per cent rule and Modi said there will not be any change in the norms. "There is no issue out there. It's a mutual understanding between franchise and the association," said Modi.
"We had a fruitful discussion. At present, Eden Gardens is undergoing renovation and we understand there were few issues. We will try our best to address them and facilitate teams and spectators for a better experience.Ganguly changed my career, says Sehwag
"I have made some suggestions which will be implemented in accordance with the architect and the new construction company," the IPL boss said.