The 33-year-old had been the favourite for the gold but his wheel slipped out of the starting blocks and he and the British camp called for a restart.
But the commissaires (race officials) ruled it a rider error and made the decision not to review video replays, much to the chagrin of both Cundy and British Cycling officials.
"I think the rules need real clarification," he said. "With swimming, there's the one false start rule and that's it. In cycling, they have mechanical things than can go wrong.
It feels like somebody's died. They haven't. I've just missed a bike race. I'll come back tomorrow - Jody Cundy
"So, fair enough to have a mishap rule but it needs to be clear that all the riders know what it is. The vagueness in the rules doesn't help the situation."
Cundy was fuming after officials ruled he could not complete. He swore, threw a water bottle and then tried to confront the commissaires only to be ushered away by British officials.
The team management tried to calm him down in the belly of the velodrome while his girlfriend, a photographer at the venue, burst into tears.
He later apologised for his reaction but added: "It feels like somebody's died. They haven't. I've just missed a bike race. I'll come back tomorrow."
Cundy refused to back down on his stance that he had done nothing wrong two hours after the race. "I do the start so many times in training and it's only once in a blue moon that something like that goes wrong when I'm not focused," he said. "I don't think I've ever been more focused as I was in the start gate."
But UCI officials, who were unmoved by chants from the crowd of "Let Him Ride", were adamant that the British rider remained in the wrong.
Technical delegate Louis Barbeau said: "To have a restart you have to have a recognised mishap. Either a puncture, a fall or the breakage of an essential part of the bicycle.
"These are the only conditions that represent a recognised mishap. Without these there cannot be a restart. The GB team claimed there was something wrong with the gate - there was nothing wrong with the gate."
What was harder to take was that Cundy felt he was in the form of his life. None of the riders preceding him at the Velodrome had matched his world record and the Briton said himself he had been setting personal bests in training every day for the last two weeks.
His teammate and track rival Jon-Allan Butterworth profited from the decision to not allow Cundy to ride and came away with the silver medal.
But the former soldier was adamant the gold would have gone to his fellow Briton. "I reckon he probably would have won that because of the way he's been going in training," said Butterworth.
Cundy has the chance to make amends in tomorrow's 4km individual pursuit and has set his sights of coming away with a medal.
"I can let my legs do the talking and we can move on from this," he said.
Reporting by Matt Majendie