Paladini had tabled a bid to purchase the Blues from Carson Yeung and had been undertaking due diligence with a view to completing the deal in the next fortnight.
But Pannu on Wednesday surprisingly issued a statement flatly denying that any talks had taken place between the two parties, a move that sparked a furious response from the former agent.
Paladini said: "His statement makes us look like idiots. We have agreed a price and everything.
"He (Pannu) doesn't want to talk to us. So we are pulling out of the deal. I'm very disappointed, but what can I do? The only way the deal can be revived is for him to take our deal.
"If he doesn't see that, there's nothing I can do. And if he doesn't want to sell there's nothing I can do. But I can show you proof that we have talked. I even reached an agreement with his lawyer about his commission.
"So what's he talking about? We want to be in before he sells all the players in January. I don't want to come in February when the club is in a right mess.
"I'm disappointed for the fans. We have worked hard to make this deal happen. Mr Pannu doesn't want to sell. He knows the deal - everything has been agreed. What else can I do?
"I'm very disappointed. We have been working on this for three months. I was looking forward to it. I could have done a fantastic deal for the club."