N. Srinivasan, the president of the Board of Control for Cricket in India (BCCI), said the ruling body had dropped the Kochi franchise due to an unspecified breach of its contract.
“We have terminated the franchise because the breach is not capable of being remedied,” he told reporters in Mumbai.
The franchise is reported to have defaulted on an annual payment of $33.1 million as a bank guarantee, according to the Indian media.
Kochi, who only made their IPL debut this year, finished eighth in the 10-team competition. The next tournament is due to start in April 2012.
The franchise was bought by little-known Rendezvous Sports World group for $333 million at an auction last year when the Pune Warriors also joined the lucrative Twenty20 tournament.
Kochi were earlier involved in a dispute over its ownership structure before being cleared by the BCCI, which owns the IPL, to take part in the 2011 edition.
The IPL has become a major event in the international cricket calendar since it began in 2008, attracting the world’s top players and large domestic audiences.
But it has also been hit by a series of financial scandals, and its founder Lalit Modi was sacked in 2010 following allegations of corruption, indiscipline and money-laundering.
The BCCI said that the IPL’s governing council would now decide whether to have an auction for a new franchise.
V.V.S. Laxman of India, Mahela Jayawardene of Sri Lanka and Brendon McCullum of New Zealand were among Kochi’s top players in the last IPL season.