1. Introduction
As international trade becomes increasingly complex, economic sanctions and export controls have become a defining challenge for multinational corporations. Those operating in India often find themselves navigating a jurisdictional puzzle: can restrictions imposed by foreign regulators excuse performance under contracts governed by Indian law? This question came to the fore in Nayara Energy Limited vs. SAP India Private Limited & Anr., where the Delhi High Court (“DHC”) recently examined whether a subsidiary contracting entity in India could rely on foreign sanctions to avoid its obligations.
This newsletter analyses the interim judgment of the DHC and explores how multi‑jurisdictional contracts should be structured and performed when foreign law sanctions are at play, balancing compliance imperatives with enforceability under Indian law.
2. Facts
In 2004, Essar Steel India Limited and SAP India Private Limited (“SAP India”), the Indian subsidiary of German-headquartered SAP SE, executed an End-User License Agreement (“EULA”). Through this agreement, SAP India licensed software to Essar Steel who, in turn assigned it to Nayara Energy Limited (“Nayara”)through an assignment agreement in 2017. Between 2017 and 2020, further software license and support order forms were executed between Nayara and SAP India for continued support. These order forms were governed by the general terms and conditions (“GTC”) and SAP Enterprise Support Schedule (“Support Schedule”). Additionally, a Delivered Support Agreement (“DSA”) was also executed in 2019 between Nayara and Avaali Solutions Private Limited, SAP India’s authorized partner, to provide several third-party modules to Nayara. The order forms, GTC, Support Schedule and DSA were all governed by Indian law and are collectively referred as “Agreements.”
On July 18, 2025, the Council of European Union placed Nayara on its sanctions list,[1] citing the fact that Rosneft, a Russian state oil company, held 49% stake in Nayara’s refinery in Vadinar. The Council concluded that Nayara was providing substantial revenue to the Russian state. In response, on July 24, 2025, SAP India blocked Nayara’s access to its support portal and marketplace, describing business with Nayara as prohibited. SAP India informed Nayara that as an EU-headquartered company it was compelled to suspend all transactions with a sanctioned entity.
Nayara approached the DHC seeking an ad-interim mandatory injunction for the restoration of their access to the marketplace and online support system, and reinstatement of SAP support services, as they existed prior to July 24, 2025. However, the court wanted to hear both the parties and not proceed ex-parte.
3. Contentions before the Court
Nayara placed the following contentions before the DHC.
(a) Indian law is the proper law: Clause 12.5 of GTC and clause 13.6 of DSA designate Indian law, the latter to the specific exclusion of the international law of conflicts. Clause 12.5 of GTC contained an express overriding provision, i.e., in the event of conflict between foreign law and Indian law, Indian law prevails and governs. Parties expressly also consented to jurisdiction of the courts at Delhi. They submitted that Clause 12.4 (regulatory/export control) is standard boilerplate, to be read in context and not in isolation, and no construction permitting SAP India to defeat Clause 12.5 could be accepted.
(b) Contracts are domestic in character: Both parties are Indian companies; the place of performance is unequivocally India; payments are made in India; and the cause of action arose entirely in India.
(c) EU sanctions have no force of law in India: India neither recognizes unilateral EU sanctions nor has imposed corresponding measures and nothing in Indian law barred performance.
(d) Unilateral suspension breached the Agreements: The remedy of specific performance rather than damages; replacing an enterprise-wide system would entail significant financial cost and an abrupt shutdown would expose Nayara’s systems to failure, cyberattacks and impair their compliance with regulatory authorities. Here, GST 2.0 compliance and invoicing was specifically cited as blocked.
In response, SAP India advanced the following arguments.
(a) Compliance with EU sanctions and German law: Support was routed through servers of the German parent, SAP SE; continued performance would expose SAP SE to criminal liability and severe penalties under the EU Sanctions Regulation and sections 17–19 of the German Foreign Trade and Payments Act. Article 15a of Regulation (EU) No. 269/2014 imposed a “best efforts” obligation on the parent to ensure its subsidiary does not participate in activities undermining the measures and Article 17 defines jurisdictional scope. SAP further relied on Clause 13.5 of the DSA[2] and on the contention that the order forms, GTC and DSA are separate contracts governed by their independent provisions.
(b) Expert legal opinion: An expert opinion placed on record corroborated the stand that services could not lawfully be provided and remained uncontroverted by any counter-opinion from Nayara.
(c) Sections 32[3] and 56[4] of Contract Act: The sanctions led to contractual contingency and the force majeure clauses under the Agreements rendered the continued performance impossible and legally void. SAP India accepted the contracts are governed by Indian law so Contract Act applied, but also contended that the specific contingency of prohibitory export-control laws had occurred with effect from July 18, 2025, thereby discharging it from further performance.
(d) Section 14(d) of Specific Relief Act[5]: The Agreements were inherently determinable, thus barring specific performance. Section 41(e) was also invoked, which provides that an injunction cannot be granted to prevent the breach of a contract which cannot be specifically enforced in the first place.
(e) Suppression of ECJ proceedings: Nayara had challenged the EU sanctions before the European Court of Justice (“ECJ”)by seeking annulment of its designation and failed to obtain relief; the concealment of those proceedings was said to disentitle it to equitable relief.
The court then proceeded to consider the matter under different heads, discussed in the next section.
4. Findings of the Court
The DHC broadly identified and ruled on the following six issues.
4.1 Governing Law: The court held that the Agreements selected Indian law as the governing law, relying on National Thermal Power Corporation v. Singer Company[6] for the proposition that an express choice of Indian law is generally decisive in determining the proper law of the contract. SAP India could not import a foreign legal regime where the Agreements expressly insulated themselves against conflicts with foreign law. The contention that the Agreements were governed individually was rejected; in the presence of a unanimous governing law clause across the three instruments, whether they formed one arrangement or two was immaterial.
4.2 Applicability of sections 32 and 56 of Contract Act: SAP India relied on both provisions. The DHC distinguished the Agreements by their express terms. Both clauses 12.7 of GTC and 13.8 of DSA contemplated an extension of the performance period rather than termination and neither could be invoked to render the Agreements void under section 32. Where the parties have expressly anticipated and provided for the contingency of trade sanctions, the contract is contingent and section 32 governs it, rather than section 51. The court drew this position from NAFED[7] which was based on Satyabrata Ghose.[8] SAP India’s attempt to treat the Agreements as a single composite arrangement to draw the DSA’s sanctions clause into the other documents, failed prima facie. The DSA was not referred to in the other documents, covered only third-party modules and was territorially limited to India. Support services, by contrast, operated worldwide and the contractual framework did not require them to be delivered exclusively from Germany. Routing them through another location might be more difficult or commercially onerous but this did not establish legal or practical impossibility. A threat of prosecution against SAP SE in Germany did not render SAP India’s performance under an Indian-law governed contract impossible.
4.3 Specific enforceability of various agreements: SAP India relied upon sections 14(d) and 41(e) of Specific Relief Act, contending that the Agreements were incapable of specific enforcement because they were determinable. Additionally, they also relied on the “minute or numerous details” ground in the unamended section 14(1)(b)[9] making it impossible for the court to supervise and enforce the terms. Relying upon the Supreme Court’s decision in K.S. Manjunath and Ors. v. Moorasaviappa,[10] the court held that only contracts unilaterally and inherently revocable at a party’s sweet will or terminable on a strictly without cause basis are determinable; a contract terminable only for cause is not. The Agreements did not confer an unrestricted at-will termination right on SAP India; each prescribed defined circumstances for termination. The “minute or numerous details” objection was rejected on the ground that the Specific Relief (Amendment) Act of 2018 omitted that phrase from the section, so the ground was no longer available. No statutory bar provided under section 14 precluded the specific enforcement of the Agreements.
4.4 Suppression of ECJ proceedings: SAP India pleaded that Nayara had challenged the sanctions before the ECJ, and not disclosing this before DHC amounted to material suppression of facts. However, the court disagreed. The ECJ challenge sought annulment of Nayara’s designation as a sanctioned entity; the suit before DHC sought specific performance and injunction. So, the reliefs and, therefore, the causes of action were entirely different. In any event, the explanation to section 10 of Civil Procedure Code[11] provides the pendency of a suit in a foreign court does not preclude an Indian court from trying a suit founded on the same cause of action.
4.5 Validity of EU sanctions and foreign law: DHC examined the evidentiary framework governing foreign law under sections 39[12] and 52[13] of Bharatiya Sakshya Adhiniyam, 2023 (“BSA”) to determine whether EU sanctions could find a defense to a contract governed by Indian law. DHC held that the provision “conspicuously does not include foreign law within its ambit.” Section 39 supplies the path by which foreign law may be brought before an Indian court through an expert opinion. The DHC noted specifically that “Indian courts take judicial notice only of Indian laws and foreign law may be proved through expert opinion.” However, the expert opinions filed by both sides failed. They were unsworn, disclosed no qualifications, cited no EU guidance or European case law and had not been tested in cross-examination. They failed “to meet even the threshold of legal admissibility.” Left only with the text of the Regulation and German Foreign Trade and Payments Act, both foreign laws, the court could not take judicial notice of either, and concluded that (a) only upon proof of foreign law at trial could the court act upon it, and (b) at the interim stage, SAP India “cannot simply place reliance on EU Regulations and other foreign law to avoid its contractual obligations under the Indian law.”
4.6 Triple test for grant of an interim mandatory injunction: DHC placed strong reliance on the Supreme Court’s observations in the Dorabji Warden case[14] which established the principles of triple test. These require consideration of whether (i) the plaintiff had a strong case for trial at a standard higher than the ordinary prima facie threshold, (ii) refusal of relief would cause serious or irreparable injury that could not adequately be compensated by damages, and (iii) the balance of convenience favored the plaintiff. The court found all these were satisfied in Nayara’s case and granted the interim injunction. DHC also expressly stated its observations were for the adjudication of Nayara’s application only, while the main suit will be decided on its merits.
5. Conclusion
This judgment is significant as it reaffirms that Indian subsidiaries are independently bound by their contractual commitments. Foreign regulatory measures cannot automatically override obligations under Indian law. A party seeking to rely on foreign sanctions to escape an Indian contract must first establish how such sanctions bind the contracting parties, irrespective of jurisdictional boundaries. The judgment highlights the need for precision in drafting multi‑jurisdictional contracts. Force majeure clauses and exemption provisions must be carefully worded to address the impact of sanctions, since generic references to “governmental restrictions” may not suffice. Contracting entities should expressly identify the relevant jurisdiction for the enforcement of their contracts, allocate the sanctions consequences and define the thresholds for suspension or termination of the contract.
Author
Shivaansh Gulati
[1] Serial No. 639 under the EU Council Regulation No. 269/2014
[2] This was in respect of export laws of various countries, including the US, EU, Ireland, Australia and Germany.
[3] Section 32 deals with contingent contracts. The contractual performance depends upon an uncertain future event, and the consequences agreed by the parties may follow upon the occurrence or failure of such an event.
[4] Section 56 deals with agreements to do impossible acts. Such agreements are in itself void. Subsequently, contracts that become impossible or unlawful upon occurrence of an unforeseen event are deemed to be void.
[5] This provision provides that contracts which by nature are determinable are not specifically enforceable.
[6] (1992) 3 SCC 551
[7] NAFED v. Alimenta S.A., 2020 SCC OnLine SC 381
[8] Satyabrata Ghose v. Mugneeram Bangur & Co., AIR 1954 SC 44
[9] Omitted by the Specific Relief (Amendment) Act, 2018
[10] 2025 SCC OnLine SC 2378
[11] Section 10 of CPC talks about stay of proceedings in a suit in which the matter in issue is also directly and substantially in issue in a previously instituted suit between the same parties.
[12] Section 39 of BSA provides that expert opinion shall be relied upon where the court is required to form an opinion on a point of foreign law.
[13] Section 52 of the BSA identifies the matters of which Indian courts must take judicial notice, including laws in force in India, but does not include foreign law.
[14] Dorab Cawasji Warden vs. Coomi Sorab Warden and Others, (1990) 2 SCC 117