The dynamic midfielder is expected to leave Spurs this summer following the club's failure to secure Champions League football.
Modric failed to join the club on their pre-season tour of America and, despite an apology to Levy, has been fined £80,000 and forced to train with the reserves.
The likes of Real Madrid and Paris Saint-Germain have been linked with a move for the Croatia international, but the club are unwilling to sell for anything under the £40 million price tag.
Kranjcar has revealed his sympathy for Modric and has criticised Levy over his handling of the situation.
"I know the chairman talked to him face to face last autumn," said Kranjcar.
"Levy did everything to protect the interests of the club and make a profit. He has also used lies to deceive the public, which is allowed in business.
"But if you were in Luka's shoes, you would probably do the same as him.
"To have an offer from Real Madrid is a once-in-a-career opportunity. I'd do anything to get to Santiago Bernabeu.
"Playing for Real Madrid is the greatest privilege in any footballer's career, even if I prefer Barcelona. That's why I understand Luka."
Kranjcar was sold to Ukrainian outfit Dynamo Kiev prior to the European Championship, ending his three-year spell at White Hart Lane.
The 27-year-old admitted it was difficult to leave Spurs due to the demands of the chairman and has pointed to the sale of Dimitar Berbatov to Manchester United in 2008 as an example.
"I know from my own experience how difficult these people are and how hard it is to break out of a contract with them," he added.
"Remember Berbatov? And it was the same with me. They held me back for two years, until my new club paid what they were asking and not a pound less.
"That is their speciality. They set unreasonably high transfer demands, but the absurd thing is they always get what they ask for.
"Dynamo Kiev is big on tradition and the fans, and though lots of people will say it's not like Tottenham, if you look at history, Dynamo Kiev is a bigger club than Spurs."
