How to Respond When an Overseas Vendor Suspends Services to Your Indian Company Over Foreign Sanctions
When an overseas vendor suspends services because a sanctions list somewhere names your company, a counterparty or a shareholder, the first instinct is to negotiate. That is often right, but it is not a substitute for a legal position, and the position weakens with every week the suspension goes unchallenged. The Delhi High Court's order in Nayara Energy Limited v. SAP India Private Limited, made on September 22, 2026, shows what the analysis looks like when it reaches a court: an Indian law contract, a sanctions defence that had not been proved, and interim relief restoring the services. This guide sets out the steps in the order they need to be taken.
Step 1: Identify Who Your Counterparty Actually Is
The entity that signed is the entity that owes performance. Where the contracting party is the Indian subsidiary of a foreign group, the exposure of the parent to a foreign measure is not the same question as what binds the subsidiary. Pull the signature pages, the assignment chain and any novation, and establish which legal person is the promisor for each service line.
In practice, a long-lived arrangement is rarely one document. A licence signed years ago, an assignment on a corporate reorganisation and a series of order forms may each govern a different part of the relationship, and the rights to suspend may differ between them.
Step 2: Read the Governing Law and Conflict Clauses Before Anything Else
A clause providing that the contract is governed by Indian law, and that Indian law prevails in the event of a conflict with foreign law, rules or regulations, is the foundation of the answer. It does not make the foreign measure irrelevant in the world, but it determines the law by which the vendor's obligation and any excuse for non-performance are judged.
Record the exact wording. A generic governing law clause is weaker than one that expressly addresses conflict with foreign rules, and the difference is worth knowing before the correspondence starts.
Step 3: Map the Suspension and Termination Machinery, Document by Document
Ask a narrow question: which clause, in which document, authorises what has actually been done? Distinguish among a right to terminate on notice, a right to terminate on a defined event such as an embargo subsisting for a stated period, a right to suspend for non-payment, and a force majeure clause that suspends obligations while an event continues.
A termination right is not a suspension right: Cutting off access while keeping the contract alive and the fees running is a different act from terminating, and a clause permitting one does not authorise the other.
A clause in one schedule does not travel to another: Where separate schedules govern separate service lines, an embargo termination ground in one cannot be read into another that has no equivalent.
Check the trigger and the waiting period: An embargo clause conditioned on the event subsisting for six months is not available in week one.
Step 4: Test the Impossibility Defence Against Sections 32 and 56
The vendor will usually say performance has become impossible or unlawful. Under Section 56 of the Indian Contract Act, 1872, 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. Section 32 makes a contingent contract void if the contingent event becomes impossible. Neither is a hardship provision.
So the question is whether performance is impossible, not whether it is harder. Where the agreements contemplate a worldwide service territory, ask whether the service can be delivered from a jurisdiction the measure does not reach, and put that alternative to the vendor in writing. Increased cost of an available route is the vendor's problem, not an excuse.
Step 5: Put the Vendor to Proof of the Measure
Foreign law is a question of fact in an Indian court. A compliance determination by a group export control team is not proof that a measure exists, that it covers the services, or that it binds the contracting entity. Write and ask for three things: the instrument relied on, the provision said to prohibit performance, and the basis on which it binds the Indian entity that signed.
A refusal or a vague answer is itself useful. It is the record on which an application for interim relief will later be argued, and it forecloses the suggestion that the point was raised only in court.
Step 6: Choose the Forum and the Relief
Where there is an arbitration agreement, interim protection is sought under the Arbitration and Conciliation Act, 1996. Where there is none, the route is a suit with an application under Order XXXIX Rules 1 and 2 of the Code of Civil Procedure, 1908, which permits a temporary injunction in a suit to restrain the defendant from committing a breach of contract, on such terms as the court thinks fit.
Frame the relief as restoration of the position as it stood immediately before the suspension, on a stated date. A mandatory interim order in those terms is easier to grant, and easier to police, than an open ended direction to perform.
Step 7: Deal With the Specific Relief Act Objections in the Application Itself
Expect two objections, and answer them on the face of the application. Section 14 of the Specific Relief Act, 1963, as substituted in 2018, provides that a contract whose performance involves a continuous duty the court cannot supervise, and a contract which is in its nature determinable, cannot be specifically enforced. Section 41(e) bars an injunction to prevent the breach of a contract the performance of which would not be specifically enforced.
Meet them concretely. Show that what is sought is the restoration of a defined and measurable service rather than open ended supervision, and address determinability by reference to the actual termination clauses rather than in the abstract. Where the contract is in fact terminable on notice, consider whether the realistic objective is a short order preserving continuity while a transition is arranged.
Step 8: Run the Continuity Workstream in Parallel
Legal relief restores a service; it does not protect the business if the service is load-bearing and the order takes weeks. Identify the systems that cannot be allowed to degrade, the data you must hold locally, the licences and keys needed to operate without vendor support, and the alternative suppliers. Do this while the application is pending.
The continuity record also strengthens the application, because the balance of convenience is argued on evidence of what breaks and when, not on assertion.
Common Pitfalls to Avoid
Accepting the vendor's characterisation: Treating an asserted sanctions prohibition as established concedes the central fact in issue.
Negotiating for months without a record: Delay weakens the case for interim relief and invites the argument that the disruption was tolerable.
Pleading frustration as hardship: Sections 32 and 56 of the Indian Contract Act, 1872 are not engaged by cost. Neither side gains from arguing them loosely.
Ignoring Section 14 until the hearing: The specific enforceability objection is predictable. An application that does not address it reads as though the point was missed.
Seeking relief in the abstract: Ask for restoration to a dated position and identify the services by name. A vague order is hard to obtain and harder to enforce.
Key Statutory Provisions
Section 32 of the Indian Contract Act, 1872: A contingent contract cannot be enforced unless and until the uncertain future event happens, and becomes void if that 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 becomes void when the act becomes impossible or, by reason of an event the promisor could not prevent, unlawful.
Order XXXIX Rules 1 and 2 of the Code of Civil Procedure, 1908: Temporary injunctions, including an injunction in a suit to restrain the defendant from committing a breach of contract, on such terms as the court thinks fit.
Section 14 of the Specific Relief Act, 1963: As substituted in 2018, contracts not specifically enforceable, including one whose performance involves a continuous duty the court cannot supervise and one which is in its nature determinable.
Section 41(e) of the Specific Relief Act, 1963: An injunction cannot be granted to prevent the breach of a contract the performance of which would not be specifically enforced.
Sources and References
Order XXXIX of the Code of Civil Procedure, 1908: Temporary injunctions and interlocutory orders
Section 41 of the Specific Relief Act, 1963: Injunction when refused
Indian Contract Act, 1872, Sections 32 and 56; Specific Relief Act, 1963, Sections 14 and 41
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.
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