The Delhi High Court restored critical SAP support services to Nayara Energy Limited, holding that Indian law governs the contract and foreign sanctions cannot excuse contractual performance without judicial proof. The judgment clarifies that parties' express choice of Indian law as governing law prevails over foreign regulations, and commercial hardship does not equate to legal impossibility under Sections 32 and 56 of the Indian Contract Act, 1872.
Background & Facts
The Dispute
The plaintiff, Nayara Energy Limited (formerly Essar Oil Limited), operates a large-scale oil refinery meeting 8% of India's energy needs. The defendant, SAP India Private Limited, provides enterprise software support services under a series of agreements dating back to 2004. The core dispute arose when defendant unilaterally suspended plaintiff's access to SAP Support Portal and related services on 24.07.2025, citing plaintiff's inclusion in the EU sanctions list due to alleged ties with Russian oil company Rosneft.
Key Facts
- The contractual relationship originated from the SAP Software End-User Value License Agreement (EULA) dated 17.08.2004 between SAP India and Essar Steel India Limited.
- Pursuant to Section 10 of the EULA, Essar Steel and Essar Oil Limited obtained SAP's consent to assign rights under the EULA to Essar Oil Limited via Assignment Agreement dated 22.06.2017, effective 01.01.2017.
- Consequently, Essar Oil Limited (later renamed Nayara Energy Limited on an unspecified date in 2018) became the sole beneficiary of the license rights.
- To operationalize the licenses, parties executed three Order Forms for software licenses and support:
- Order Form 1: 22.06.2017 (effective 01.01.2017)
- Order Form 2: 16.11.2017
- Order Form 3: 07.06.2020
- All Order Forms expressly incorporate the General Terms and Conditions (GTC) and SAP Enterprise Support Schedule as governing frameworks.
- The SAP Delivered Support Agreement for specific third-party modules was executed on 29.03.2019.
- Commercial implementation was managed through Annual Work Orders; the last accepted Work Order (No. 4300029516) covered 01.01.2025 to 31.12.2025, with payment duly made by plaintiff.
- On 24.07.2025 at 13:24 hours, defendant informed plaintiff via email that access to SAP Support Portal was blocked due to an alleged 'export issue'.
- Later the same day at 16:13 hours, defendant's Global Export Control Team stated plaintiff was subject to EU sanctions under Council Implementing Regulation (EU) 2025/1476 (dated 18.07.2025), amending Regulation (EU) No 269/2014.
- EU Council Regulation No. 269/2014 listed plaintiff at serial no. 639 in Annexure I effective 18.07.2025, citing plaintiff's 49% ownership by Rosneft and role as major refiner of Russian crude oil providing revenue to Russian Government.
- Plaintiff issued an email on 29.08.2025 requesting immediate resumption of support services, noting advance payment had been made.
- Defendant responded on 02.09.2025, asserting compliance with EU sanctions was mandatory due to plaintiff's addition to the sanctions list.
- Plaintiff's annual expenditure on SAP support services was Rs. 8,88,15,791/- (para 52), while the Delivered Support Agreement fee for four third-party modules was approximately Rs. 23 lakhs per year (para 32).
- The support fees under the three Order Forms collectively amounted to approximately Rs. 63,64,61,060/- for the past decade (para 27).
- Plaintiff operates critical infrastructure requiring SAP-exclusive licenses for disaster recovery and business continuity frameworks mandated by PNGRB, CERT-In, Ministry of Petroleum, and OISD (para 48, 50).
Procedural History
- 24.07.2025: Defendant unilaterally suspended plaintiff's access to SAP Support Portal and related services.
- 29.08.2025: Plaintiff emailed defendant requesting immediate resumption of support services.
- 02.09.2025: Defendant replied citing EU sanctions as justification for suspension.
- 17.09.2025: Plaintiff filed the present application (CS(COMM) 1006/2025) seeking interim relief.
- The matter underwent 11 long hearings before final judgment.
The Parties' Positions
Plaintiff's case: Defendant's suspension violated contractual obligations as Indian law governs the agreement (per GTC Clause 12.5 and Delivered Support Agreement Clause 13.6), EU sanctions lack extraterritorial application in India, and defendant failed to prove foreign law as fact. Plaintiff faced irreparable harm including regulatory penalties, operational shutdowns, and inability to maintain disaster recovery systems.
Defendant's case: As an EU-headquartered company, defendant was compelled to comply with EU Council Regulation No. 269/2014; plaintiff's inclusion in sanctions list made support provision unlawful; agreements were determinable or involved continuous duties barring specific performance; and plaintiff suppressed ECJ proceedings.
Relief Sought
Plaintiff sought: (a) Ex parte ad interim order directing restoration of full and uninterrupted access to SAP Marketplace and OSS as existed prior to 24.07.2025. (b) Ex parte ad interim order directing provision of SAP hardware keys and SSCR keys for new hardware installation. (c) Ex parte ad interim order directing reinstatement of SAP support services in the form of functional and technical expert availability. (d) Ex parte ad interim order restraining defendant from interfering with plaintiff's right to access and use SAP Software and Services.
The Legal Issue
The central question was whether foreign sanctions under EU Council Regulation No. 269/2014 could excuse defendant's contractual obligation to provide support services under agreements expressly governed by Indian law, without proof of such sanctions as a fact in Indian courts, and whether the agreements were determinable or involved continuous duties barring specific performance under the Specific Relief Act, 1963.
Arguments Presented
For the Plaintiff
Plaintiff relied on the express governing law clauses in GTC (Clause 12.5) and Delivered Support Agreement (Clause 13.6) designating Indian law as governing law and providing that Indian law prevails over foreign law in case of conflict. It argued that under Section 52(1) of Bharatiya Sakshya Adhiniyam, 2023, Indian courts cannot take judicial notice of foreign law; such law must be pleaded and proved as fact like any other material fact, citing Hari Shanker Jain v. Sonia Gandhi (2001) 8 SCC 233 and Rasmala Trade Finance Fund v. Raman Gupta (2019) SCC OnLine Del 9285. Plaintiff contended defendant failed to adduce expert evidence on EU sanctions, rendering reliance on foreign law inadmissible. Regarding Sections 32 and 56 of the Indian Contract Act, 1872, plaintiff argued that Section 32 applies only where contingencies are expressly provided in the agreement (which was absent here), and Section 56 requires supervening impossibility striking at the root of the contract - commercial hardship from rerouting support services does not constitute legal impossibility per Energy Watchdog v. CERC (2017) 14 SCC 80. Plaintiff further asserted that agreements were not determinable as defendant lacked unilateral termination right (per K.S. Manjunath v. Moorasaviappa, 2025 SCC OnLine SC 2378 and Mahajan Imaging v. Pushpawati Singhania Research, 2026 DHC 1735), and did not involve continuous duties requiring court supervision. Finally, plaintiff maintained it satisfied the triple test for interim mandatory injunction: strong prima facie case, irreparable injury (regulatory non-compliance, operational shutdown), and balance of convenience in its favour.
For the Respondent/State
Defendant argued that as an SAP SE subsidiary headquartered in Germany, it was bound by EU Council Regulation No. 269/2014; plaintiff's sanctions listing made support provision unlawful under Articles 2 and 9 of the Regulation; and Article 15a (inserted via Council Regulation (EU) 2025/390) required parent companies to ensure subsidiaries comply with sanctions. It contended that EU sanctions constituted 'export laws' under contractual clauses (Order Forms Clause 2, GTC Clause 12.4, Delivered Support Agreement Clause 1.1.5 and 13.5), triggering termination rights under Section 32 of the Indian Contract Act. Defendant alternatively claimed Section 56 applicability if no contractual contingency existed. It asserted agreements were determinable: Order Forms as licenses (K.S. Manjunath), GTC Clause 5.1 allowing termination for material breach, Support Schedule Clause 6.1 permitting termination for non-payment, and Delivered Support Agreement Clause 13.5 allowing termination for embargoes. Defendant further argued agreements involved minute technical details (Section 14(1)(b) Specific Relief Act) and continuous duties (Section 14(1)(d)) barring specific performance, citing Abhijit Mishra v. Wipro Ltd. (2025) and Indian Oil Corporation Ltd. v. Amritsar Gas Service (1991) 1 SCC 533. Finally, defendant alleged plaintiff suppressed ECJ proceedings where it challenged sanctions listing, constituting material non-disclosure.
The Court's Analysis
The Court began by ascertaining the proper law of contract. It held that where parties have expressly and categorically stipulated governing law and exclusive jurisdiction, such intention is decisive (National Thermal Power Corporation v. Singer Company, 1992) 3 SCC 551. Both GTC Clause 12.5 and Delivered Support Agreement Clause 13.6 explicitly designated Indian law as governing law, provided Indian law prevails over foreign law in conflict, and vested exclusive jurisdiction in Delhi courts. The Court concluded: "The proper law of the contract is the substantive domestic law of the Republic of India, therefore, the parties are legally bound by this expressly chosen law." (para 135)
On applicability of EU sanctions, the Court emphasized that under Section 52(1) of BSA, Indian courts take judicial notice only of laws in force in India; foreign law must be proved as fact. It relied on Hari Shanker Jain (supra) and Rasmala Trade (supra) to hold that foreign law cannot be judicially noticed and must be pleaded like any other fact, requiring expert evidence. The Court noted defendant's expert opinions on EU sanctions were mere ipse dixit lacking qualifications, credentials, or authoritative support, and were not corroborated by affidavits or cross-examination. Consequently, "the onus of proving EU Regulations and the laws of Germany on which reliance has been placed lies on the defendant no.1. They have to be proved as a question of fact to the satisfaction of this Court." (para 155)
Regarding Sections 32 and 56 of the Indian Contract Act, 1872, the Court distinguished the provisions: Section 32 applies where agreement expressly provides for contingencies (e.g., export prohibitions), rendering contract void upon occurrence; Section 56 applies where performance becomes impossible due to unforeseen exigency not contemplated in agreement. It found no contractual provision for trade sanctions contingency in Order Forms or GTC - Clause 12.4 of GTC mentions "Software", "Documentation", and "SAP Materials" as subject to export control laws but conspicuously omits the defined term "SAP Support". Thus, Section 56 would apply only if trade sanctions were proven as fact. However, the Court held defendant failed to prove EU sanctions as fact, so neither section could be invoked. Even assuming applicability, the Court rejected impossibility defence: agreements defined territory as "worldwide" (Order Forms Clause 2, GTC Clause 1.14), support services were monitored across multiple time zones (including India and US), and digital services are not geographically confined. Citing Energy Watchdog v. CERC (supra), it held: "Commercial hardship cannot be equated to legal impossibility. Merely because arranging the supply of support services from an alternative location might be onerous, defendant no. 1 cannot contend that the contract stands discharged due to impossibility of performance." (para 184)
On specific enforceability, the Court held agreements were not determinable under Section 14(d) Specific Relief Act, 1963. Following K.S. Manjunath (supra) and Mahajan Imaging (supra), the determinability test requires assessing whether plaintiff (against whom specific performance is sought) could terminate contract when willing to perform. Plaintiff had termination rights under Order Forms (e.g., Order Form 2 Clause 3 allowing plaintiff termination), but defendant lacked unilateral right - defendant could terminate only for material breach with cure period (GTC Clause 5.1) or insolvency. Support Schedule Clause 6.1 required termination notice at fixed junctures (end of term), not "at will". Delivered Support Agreement Clause 13.5 allowed termination only for embargoes lasting six months+ - a cause-specific right, not "at will". Thus, agreements were not determinable. The Court also rejected continuous duty bar: agreements delineated rights/obligations clearly, and decade-long performance showed no need for day-to-day court supervision (Mahajan Imaging, supra).
Finally, on interim mandatory injunction, the Court applied the triple test from Deoraj v. State of Maharashtra (2004) 4 SCC 697 and Dorab Cawasji Warden v. Coomi Sorab Warden (1990) 2 SCC 117. It found plaintiff demonstrated: (1) strong prima facie case (contract governed by Indian law, foreign law unproven); (2) serious/irreparable injury (regulatory penalties, operational shutdown, inability to maintain disaster recovery systems per para 48, 50); and (3) balance of convenience in plaintiff's favour (minimal inconvenience to defendant vs. catastrophic consequences for plaintiff). The Court granted relief to preserve status quo and prevent injustice.
The Verdict
The plaintiff succeeded in obtaining interim mandatory injunction. The Court directed defendant to immediately restore full and uninterrupted access to SAP Marketplace, OSS, SAP hardware keys, SSCR keys, and support services as existed prior to 24.07.2025. It awarded costs of Rs. 25,000 to plaintiff and directed compliance within 8 weeks from the date of judgment (21.09.2026). The relief was framed as preservation of status quo pending final adjudication, with specific reference to plaintiff's critical infrastructure needs and advance payment already made.
What This Means For Similar Cases
Governing Law Clauses Are Binding
Parties' express choice of governing law in commercial contracts prevails over foreign regulations. Courts will not allow foreign law to excuse contractual performance without strict proof as fact. Practitioners must ensure governing law clauses explicitly state that domestic law prevails over foreign law in conflict (as in GTC Clause 12.5) and vest exclusive jurisdiction in preferred forums. This judgment reinforces that boilerplate governing law provisions are decisive and not mere formalities.
Foreign Law Requires Strict Proof
Foreign regulations cannot be judicially noticed in Indian courts; they must be pleaded and proved like any other material fact through admissible expert evidence. Expert opinions must be backed by qualifications, credentials, affidavits, and withstand cross-examination. Mere reliance on foreign law texts or unverified expert opinions is insufficient. This raises the evidentiary burden for parties seeking to invoke foreign sanctions or regulations as defence to contractual non-performance.
Commercial Hardship ≠ Legal Impossibility
Inability to perform due to foreign sanctions does not automatically trigger Sections 32 or 56 of the Indian Contract Act unless: (a) contract expressly provides for such contingency (Section 32), or (b) performance becomes objectively impossible (not merely onerous or expensive) due to unforeseen supervening event (Section 56). Practitioners should scrutinize whether contracts define territory as worldwide and whether alternative performance routes exist within the corporate group before accepting impossibility defences based on foreign law.
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