Court holds Indian law governs contract despite EU sanctions; directs immediate reinstatement of SAP support services, citing contractual obligations and national interest
In a significant ruling dated September 21, 2026, the Delhi High Court directed SAP India Private Limited to immediately restore full and uninterrupted access to its SAP support services for Nayara Energy Limited, reversing the suspension triggered by EU sanctions imposed on Nayara. The order came in a suit filed by Nayara Energy, which challenged SAP’s unilateral cessation of support services citing compliance with the European Union’s Council Regulation (EU) No. 269/2014 sanctions against Nayara.
Nayara Energy Limited, a major Indian oil refinery company formerly known as Essar Oil Limited, had its SAP software support services suspended abruptly on July 24, 2025. SAP India attributed the suspension to Nayara’s inclusion on the EU sanctions list, due to its 49% ownership by the Russian state oil company Rosneft and its role in refining Russian crude oil. The plaintiff argued that under the contractual framework, governed by Indian law, SAP India was obligated to continue providing support services, which are critical for Nayara’s compliance with multiple Indian regulatory authorities and for maintaining uninterrupted operations vital to India’s energy sector.
The core contractual relationship between the parties rests on a series of agreements executed over the years, including the SAP Software End-User Value License Agreement (EULA) originally with Essar Steel, which was assigned to Nayara Energy, and three subsequent Software License and Support “Order Forms” governed by the SAP General Terms and Conditions (GTC) and SAP Enterprise Support Schedule. All agreements explicitly designate Indian law as the governing law and the courts in New Delhi as having exclusive jurisdiction. Nayara contended that this contractual choice excludes the applicability of foreign sanctions such as the EU’s.
SAP India contended that as a subsidiary of SAP SE, a German entity headquartered in the EU, it was compelled under EU sanctions and German export control laws to suspend services to Nayara. They argued that the sanctions prevented them from providing economic resources or services to a sanctioned entity and that the contracts were either determinable or discharged due to impossibility caused by these foreign laws. SAP also relied on specific clauses in the Delivered Support Agreement that permit termination due to embargoes or sanctions.
After extensive hearings spanning 11 sessions, the Delhi High Court meticulously analyzed the contractual matrix, statutory provisions including the Indian Contract Act and Specific Relief Act, and principles relating to foreign law and judicial notice. The Court held that:
1. The proper law of contract is Indian law, as expressly stipulated in all agreements between the parties, which prevail over any foreign laws in case of conflict.
2. EU sanctions constitute foreign law, which the Indian courts cannot take judicial notice of without formal proof through expert evidence. Mere invocation of EU regulations by SAP India at the interim stage is insufficient to excuse breach of contract.
3. The contractual clauses relied upon by SAP India do not confer an absolute right to terminate services due to foreign sanctions under the Order Forms and GTC. The Delivered Support Agreement, which contains a termination clause for embargo or trade sanctions, governs only a limited subset of support services for third-party modules and is not a composite arrangement governing all support obligations.
4. The contracts are not determinable in nature since SAP India does not possess an unfettered right to terminate the agreements at will. Termination rights are contingent upon cause and cure provisions, and the support agreements are auto-renewing.
5. The doctrine of frustration or impossibility under Sections 32 and 56 of the Indian Contract Act does not apply as the alleged impossibility arises from unproven foreign sanctions, and the performance of support services is not practically impossible given SAP’s global network.
6. Commercial hardship or regulatory risk to SAP SE does not amount to legal impossibility of performance.
7. The suspension of SAP support services causes irreparable harm to Nayara, affecting critical infrastructure compliance and operations that serve approximately 8% of India’s energy needs.
8. The balance of convenience lies in favor of Nayara, and the interim mandatory injunction to restore services is warranted to prevent injustice and preserve the status quo pending final adjudication.
The Court ordered SAP India to reinstate all SAP support services, including access to the SAP Marketplace, software license keys, and expert technical assistance, as existed before July 24, 2025, with immediate effect. It clarified that this order does not prejudice the ultimate merits of the suit.
This judgment underscores the primacy of Indian law in contracts executed and performed in India, and limits the extraterritorial application of foreign sanctions without proper judicial proof. It also highlights the critical importance of uninterrupted enterprise software support for national infrastructure entities.
Bottom Line:
Contract governed by Indian law - Foreign law, including EU sanctions, cannot be judicially noticed by Indian Courts and must be pleaded and proved as a fact through admissible expert evidence - Interim mandatory injunction can be granted directing restoration of software support services where unilateral suspension based on unproved foreign sanctions is prima facie illegal, agreements are not determinable in nature, and denial of support threatens critical infrastructure and causes irreparable injury.
Statutory provision(s):
Indian Contract Act, 1872 Sections 32, 56; Specific Relief Act, 1963 Sections 14(b), 14(d); Bharatiya Sakshya Adhiniyam, 2023 Sections 39, 52; Code of Civil Procedure, 1908 Explanation to Section 10
Nayara Energy Limited v. SAP India Private Limited, (Delhi) : Law Finder Doc Id # 2982687
