FOREIGN SANCTIONS; NO EXCUSE FOR INDIAN CONTRACTS: DELHI HIGH COURT DIRECTS SAP INDIA TO RESTORE SUPPORT SERVICES TO EU-SANCTIONED NAYARA ENERGY

The Delhi High Court, in Nayara Energy Ltd. v. SAP India Pvt. Ltd. & Ors., judgment dated 21.09.2026, allowed an application under Order XXXIX Rules 1 and 2 of the Code of Civil Procedure, 1908 (CPC) and granted an interim mandatory injunction directing SAP India Pvt. Ltd. (SAP India) to restore all enterprise and software support services to Nayara Energy Ltd. (Nayara). Justice Vikas Mahajan held that where the contracts are governed by Indian law with an express clause giving Indian law primacy over foreign law, a party cannot rely on unproven EU sanctions, which are foreign law not judicially noticeable by Indian courts, to suspend performance at the interim stage.

The relationship arose from an SAP Software End-User Value License Agreement dated 17.08.2004 (EULA) granting perpetual, non-exclusive licenses to Essar Steel India Ltd. By an Assignment Agreement dated 22.06.2017 (effective 01.01.2017), the licenses and support entitlements were assigned to Essar Oil Ltd., later renamed Nayara. The parties then executed three Order Forms dated 22.06.2017, 16.11.2017 and 07.06.2020, governed by the SAP General Terms and Conditions (GTC) and the SAP Enterprise Support Schedule (Support Schedule), and a separate SAP Delivered Support Agreement dated 29.03.2019 (DSA) for four third-party modules supplied through SAP’s partner, Avaali Solutions Pvt. Ltd. Support was implemented through annual work orders, the last covering 01.01.2025 to 31.12.2025, for which Nayara had paid.

On 18.07.2025, Nayara was listed at serial no. 639 of Annex I to EU Council Regulation No. 269/2014 on the ground that its Vadinar refinery is 49% owned by Rosneft. On 24.07.2025, SAP’s Global Export Control Team declared business with Nayara “prohibited” and blocked its access to the SAP support portal. By email dated 02.09.2025, SAP India stated that, as part of an EU-headquartered group, it was compelled to suspend all transactions with Nayara. Notably, Clause 12.5 of the GTC provided that the agreement is governed by Indian law and that ‘in the event of any conflicts between foreign law and Indian law, Indian law shall prevail and govern’, with jurisdiction in New Delhi.

Nayara contended, inter alia, that the suspension breached Clause 12.5 of the GTC; that Clause 12.4 of the GTC did not cover the defined term “SAP Support”; that the EU Regulation did not reach SAP India, an Indian company performing in India, under Article 17; and that the loss of support threatened critical infrastructure serving about 8% of India’s energy needs. SAP India contended that the support was centrally delivered by its German parent, SAP SE, which was bound by Articles 2, 15a and 17(e) of the Regulation and faced criminal liability under German law; that the contracts were contingent or frustrated under Sections 32 and 56 of the Indian Contract Act, 1872 (Contract Act); that they were determinable and incapable of specific performance under the Specific Relief Act, 1963 (SRA); that no work order subsisted for 2026; and that Nayara had suppressed its challenge to the sanctions before the European Court of Justice (ECJ).

Analysis and findings of the Court 

The Court framed the following points for consideration, covering the governing law, the applicability of EU sanctions, Sections 32 and 56 of the Contract Act, specific enforceability, suppression and the test for an interim mandatory injunction. In this context, the court held as follows:

1. Proper law of contract: Express choice of law is generally decisive. Clause 12.5 of the GTC (applicable to the Order Forms and the Support Schedule) and Clause 13.6 of the DSA each chose Indian law and New Delhi courts, and the GTC expressly subordinated foreign rules to Indian law. However the agreements were grouped, all contractual paths led to Indian law.

2. Foreign law is a question of fact: Section 52(1) of the Bharatiya Sakshya Adhiniyam, 2023 (BSA) requires judicial notice only of laws in force in India. Relying on Hari Shanker Jain v. Sonia Gandhi, the Court held that foreign law must be pleaded and proved through expert evidence under Section 39 of the BSA. In this case, the expert opinions filed by both sides were unsworn, disclosed no credentials, cited no EU authority and had not been tested in cross-examination; SAP India’s opinion was a mere ipse dixit. SAP India therefore could not rely on the EU Regulation or German law at the interim stage.

3. Sections 32 and 56 of the Contract Act: Following NAFED v. Alimenta S.A., the Court held that the DSA, which expressly contemplated trade sanctions, was a contingent contract under Section 32. The GTC and Order Forms were not: Clause 12.4 of the GTC omitted the defined term “SAP Support”, and “export control laws” was undefined, so Section 56 alone could apply to them. In either case, the unproven sanctions could not establish impossibility. The force majeure clauses only extended time for performance and did not terminate the contracts.

4. Commercial hardship is not impossibility: The licences and support were “worldwide”, SAP India had pleaded that support was monitored from Germany, the United States and India, and nothing in the contracts required delivery from Germany. Routing remote, cloud-based support through non-EU entities might be onerous, but, relying on Energy Watchdog v. CERC, onerous performance does not frustrate a contract.

5. DSA was not part of a composite arrangement: SAP India’s “single composite arrangement” argument was not pleaded. The DSA is not referred to in the Order Forms, GTC or Support Schedule, covers only four third-party modules (about Rs. 23.32 lakh a year against about Rs. 7.53 crore under the Order Forms for 2025) and is limited to India as its territory. Its sanctions-termination clause could not be extended to the main support services.

6. Supervision and minute details: The “minute or numerous details” bar was omitted by the 2018 amendment to the SRA. The Section 14(b) bar on continuous duties was not attracted because the agreements set out the obligations in full and had operated for nearly a decade without needing day-to-day judicial supervision.

7. ECJ proceedings: The ECJ proceedings sought annulment of the listing, not specific performance, and in any event, under the Explanation to Section 10 of the CPC, a foreign suit does not bar an Indian suit on the same cause of action. Work orders were Nayara’s internal purchase documents issued under subsisting contracts, so the expiry of the 2025 work order did not make the application infructuous.

8. Interim mandatory injunction: The Court found a strong prima facie case of a higher standard than usual, given that the suspension was ex facie illegal. Irreparable harm was shown by the risk of system failures and cyber vulnerabilities, the Petroleum and Natural Gas Regulatory Board (PNGRB) Regulation of 12.12.2025 on cyber-attack preparedness and the absence of alternatives, and the balance of convenience favoured Nayara. There could be no real prospect of prosecution where an Indian entity performs its contract under a court direction.

Conclusion:

The Court allowed the application and directed SAP India to restore the status quo ante as it existed before 24.07.2025 by immediately resuming all enterprise and software support services, clarifying that its observations are prima facie and shall not affect the final adjudication of the suit. The judgment confirms that an express Indian governing-law clause giving Indian law primacy over foreign law will be enforced against attempts to invoke foreign sanctions; reaffirms that foreign law, including sanctions regimes, must be pleaded and proved through admissible expert evidence and cannot be judicially noticed at the interim stage.