While there is denial of any knowledge of any directive on one side, there are allegations that more than just sport was at play during the IPL 3 auctions.

S.M. Krishna, External Affairs Minister of India, denied that the Indian government had any hand in the IPL 3 auctions seeing none of the Pakistan cricketers picked. He asked the people across the border to note the perceptible difference when the Indian government was not responsible for the selections for the IPL or even the running of the IPL, a sentiment echoed by India's Sports Minister, M.S. Gill.
However, Pakistan is not buying the agreement. Pakistan’s Foreign Office spokesman, Abdul Basit, is not in agreement with the Indian Commission who earlier stated that, "Pakistan should introspect on the reasons which have put a strain on relations between India and Pakistan, and have adversely impacted on peace, stability and prosperity in the region" with the counter argument using the very statement, "It is clear from the press release of the Indian High Commission that the decision to not include Pakistani cricketers was influenced by variables extraneous to sports and the press release is self-explanatory as to why the cricketers were not included in the bidding process. It is ironic that instead of requesting sporting agencies to resolve the issue, India is again engaging in blame game, point scoring and continuing its unwillingness to resolve bilateral issues through dialogue and peaceful means," to quote an article on the story by the Pakistan newspaper, Dawn.
It is clear that this issue is not likely to simmer down easily.
Shilpa Shetty, Lalit Modi: "We Owe No One an Explanation"
Pakistan Players in Lurch: Forget Cross Border Peace; This is Cold Blooded Business
Wayne Parnell Calls This is his Most Memorable Week in Cricket Career
Eoin Morgan's Fears About an IPL Miss Surfaced After Afridi's Miss
Martyn Credits Warne for Revived Cricket Interests, a Stint with the Royals
Finger Pointing: Anger Seethes in Pakistan over IPL 3 Omission of Pakistan Cricketers
Player Availability A Concern, Says Shilpa; Ness Hints At Australia
Franchisees Plead with Modi for No Major Shuffle/Auction for IPL 4
Preity Zinta and Ness Wadia Differ on Yuvraj's Abilites as Captain, Sachin Dragged in
Ganguly's Captaincy Decision: A Matter of Harmony, Says Jai Mehta
Pakistan Cricketers, Ex-Cricketers and Administrators Lash Out at India Over IPL Snub
You Tube to Stream Live Matches? Lalit Modi's Lips Sealed
Preity Zinta Says Brett Lee's Fine, Will Play in IPL 3
Pollard and Bond Make Millions From IPL 3 Auction, Surpass KP, Freddie Numbers!
Ponting Bought out of Contract by KKR
Surprise Package for Mohammad Kaif at IPL 3 Auction!
Modi Breaks Auction Inactivity - Kemp, Voges, Abdulla, Win Places!
3 Under-19 Players, Including Menaria, Picked Up!
Martyn, Perera Breaks Lack of Activity in Pool C, D and E!
Kemar Roach Goes To Deccan Chargers After Tense Affair; Morgan Goes to RCB Belatedly
Pool B: Parnell Snared for $610,000 by Daredevils; Bond Goes to KKR; No Takers for Kaif
IPL 3 Auctions See Kieron Pollard Enter the Silent TieBreaker with MI, Afridi Unsold!
Will IPL Teams Pick Pak Players?
IPL's Silent Tie Breaker Does not Get Franchisees' Vote
CA Asks Australlian Cricketers to Make their Own Decision; Hayden In; Gilly May Come
IT Department Decides BCCI is not Charitable; BCCI Plans to Appeal
SRK Feels He has Let Down the Cricket Fans of Kolkata
Peter Siddle Shuns IPL 3; Focusses on Crushed Pakistan
Cairns Determined to Go Ahead with Suing Modi ; Modi Unfazed
IPL 3's Flip Flop on England Players

ICC May Receive Official Complaint about the IPL Snub of Pakistan Cricketers in cricket