The double world champion clashed with Cavendish in the final few hundred metres of the stage to Vittel, sending the Dimension Data rider tumbling to the tarmac at high speed.
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After a crash with 800m to go which took down a number of riders including the yellow jersey of Geraint Thomas (Team Sky), just a handful of sprinters remained to contest the sprint finish.
Cavendish was towards the back of the group, and launched his sprint to go around the right hand side of Sagan, who was also moving to the right towards the barriers.
Sagan then appeared to close the gap, using his elbows and forcing Cavendish into the barriers.
Cavendish looked in serious pain as he was tended to by lead-out man Mark Renshaw, with initial medical reports suggesting that he had suffered injuries to his right hand and right shoulder, but had not sustained any fractures.
Around an hour after the end of the stage, race jury president Philippe Marien announced the decision of the jury.
“We decided to disqualify Peter Sagan from the Tour de France as he endangered some of his colleagues seriously in the final metres of the sprint which happened in Vittel,” Marien said.
According to UCI rules, riders are not normally disqualified from the race for “irregular sprinting” until their third offence. However there is provision to disqualify a rider on the first offence in “particularly serious cases”