Delhi High Court Orders SAP India to Restore Support Services and Holds Unproved Foreign Sanctions Are No Defence

Kaustav Chowdhury

22 hours ago

5 min read

Background and Facts

An Indian vendor cannot suspend performance of an Indian law contract by pointing at foreign sanctions it has not proved apply to it. The Delhi High Court has ordered SAP India Private Limited to restore enterprise and software support services to Nayara Energy Limited, holding that at the interlocutory stage the suspension was prima facie a breach. The order in Nayara Energy Limited v. SAP India Private Limited was made by Justice Vikas Mahajan on September 22, 2026.

The relationship is not one document. It rests on a software licence agreement entered into years before the present dispute, the benefit of which was later assigned to Nayara on a corporate reorganisation, with subsequent order forms governing further licences and support lines. The general terms provided for Indian law to govern, and for Indian law to prevail in the event of a conflict with foreign law, rules or regulations.

Nayara was placed on the European Union sanctions list on July 18, 2025. Six days later, on July 24, 2025, SAP disabled Nayara's access to the SAP Support Portal. SAP's global export control function took the position that providing support through its German parent was prohibited, and that performance had become impossible or unlawful.

Key Legal Issue

Whether European Union sanctions and German export control rules rendered performance impossible or unlawful within Sections 32 and 56 of the Indian Contract Act, 1872, so as to justify unilateral suspension of services under a contract expressly governed by Indian law, and whether an interim mandatory injunction should issue to restore them.

The Delhi High Court's Order

Justice Vikas Mahajan directed SAP India to resume enterprise and software support immediately and to restore the position as it stood before July 24, 2025. The relief was interim, on an application in a commercial suit, and the findings are expressly prima facie.

Foreign Law Must Be Proved, Not Asserted

The starting point was the governing law clause. The Court recorded that

"the contractual relationship between the parties is strictly governed by the domestic laws of the Republic of India", and that the agreement gave conscious and unambiguous primacy to Indian law. A party cannot displace that choice by asserting the existence and effect of a foreign measure it has not established. Foreign law is a question of fact in an Indian court, and a defence built on it has to be pleaded and proved like any other.

The Court also recorded that directing an Indian company to perform under an order of an Indian court did not create any real or imminent prospect of prosecution of that company. The risk asserted was of enforcement against a foreign affiliate, not against the contracting Indian entity.

Impossibility Under Sections 32 and 56 Is a High Bar

Section 56 of the Indian Contract Act, 1872 provides that a contract to do an act which, after the contract is made, becomes impossible, or by reason of some event which the promisor could not prevent becomes unlawful, becomes void when the act becomes impossible or unlawful. Section 32 provides that a contingent contract becomes void if the contingent event becomes impossible. Neither provision is engaged by performance becoming harder or more expensive.

On the facts the Court found it improbable that a technology group of SAP's size was technologically or operationally incapable of routing support through a hub outside the European Union, given the worldwide service territory the agreements themselves specified. Delivering the services from such a jurisdiction might be commercially more onerous, but the Court did not accept that it made performance impossible. At the interlocutory stage SAP

"cannot take advantage of these unproven EU sanctions to argue that performance of contract has become impossible". That is the orthodox Indian position on frustration, applied to a sanctions fact pattern.

There Was No Contractual Right to Suspend at Will

The Court examined the suspension and termination machinery and found no clause giving SAP an unfettered or unilateral right to suspend or terminate the support services at will. A termination right available in one of the support documents where an embargo subsisted for six months or more could not be read across into another schedule that contained no comparable sanctions ground. The suspension was therefore prima facie a breach.

The Court also noted the public interest dimension. Nayara supplies a substantial share of India's refined fuel, and the continuity of the technical systems that run a refinery is not a purely private matter between contracting parties.

Practice Notes

In practice, the order is about pleading and proof as much as about sanctions:

A sanctions defence is an evidentiary burden: The measure, its reach, and its binding effect on the contracting entity must be established. An internal compliance determination by a group export control team is not proof of any of the three.
Identify the contracting entity precisely: Exposure of a foreign parent is not exposure of the Indian subsidiary that signed. Where the Indian entity is the promisor, the question is what binds that entity.
Audit the suspension clauses, not just force majeure: A right to terminate on a defined embargo after a stated period is not a right to suspend at will, and a clause in one schedule does not travel to another. Map which document governs which service line.
Commercial hardship is not impossibility: Sections 32 and 56 of the Indian Contract Act, 1872 are not a hardship regime. A party seeking relief from increased cost needs a price adjustment or hardship clause, drafted in advance.
For the customer, move early and on continuity: The relief here restored the status quo as it stood on the date of suspension. The case for interim relief is strongest while the disruption is recent and the operational consequences can be evidenced.

Key Provisions Discussed

Section 32 of the Indian Contract Act, 1872: Contingent contracts to do or not to do anything if an uncertain future event happens cannot be enforced unless and until that event has happened, and become void if the event becomes impossible.
Section 56 of the Indian Contract Act, 1872: An agreement to do an act impossible in itself is void, and a contract to do an act which after the contract is made becomes impossible, or by reason of an event the promisor could not prevent becomes unlawful, becomes void at that point.

Case Details

Case: Nayara Energy Limited v. SAP India Private Limited
Court: High Court of Delhi at New Delhi
Judge: Justice Vikas Mahajan
Date of Order: September 22, 2026
Nature: Interim application in a commercial suit; findings prima facie
Outcome: SAP India directed to restore enterprise and software support services immediately, restoring the position as it stood before July 24, 2025.

Sources and References

Disclaimer: This article is for informational purposes only and does not constitute legal advice. Readers should consult a qualified legal professional for advice specific to their circumstances.