What happens when a foreign parent's sanctions exposure collides with an Indian subsidiary's contractual obligations? On 21 September 2026, Justice Vikas Mahajan of the Delhi High Court answered emphatically in Nayara Energy Limited v. SAP India Private Limited, CS(COMM) 1006/2025: the contract, governed by Indian law and performed in India, prevails. SAP India was directed by interim mandatory injunction to restore the support services and portal access it had suspended after Nayara was listed under EU Council Regulation No. 269/2014.
The suspension
Nayara Energy, which operates one of India\'s largest refineries, had used SAP\'s enterprise software under agreements running since 2004 — licences, support and portal access, all governed by Indian law. On 24 July 2025, SAP India abruptly suspended support and blocked Nayara\'s access to the SAP Support Portal. The stated reason lay an ocean away: the EU had added Nayara to its sanctions list under Council Regulation No. 269/2014, on account of its part-ownership by Rosneft, and the SAP group feared exposure under Articles 17 and 15a of that regulation. Nayara sued for enforcement of the contracts and sought interim relief.
The issues before the Court
What the Court held
Justice Mahajan granted the interim mandatory injunction. The contractual foundation was decisive: Clause 12.5 of the General Terms and Conditions stipulated that "in the event of any conflicts between foreign law, rules, and regulations, and Indian law, rules, and regulations, Indian law, rules, and regulations shall prevail and govern." Applying the principle in National Thermal Power Corporation v. Singer Company that the proper law of the contract governs its obligations, the Court held that EU sanctions could not be imported into an Indian-law contract. Nor could the Court judicially notice EU law: under the evidence regime — Section 52 of the Bharatiya Sakshya Adhiniyam, 2023, corresponding to the position under Sections 45 and 84 of the Evidence Act — foreign law is a fact requiring proof through expert opinion. The frustration argument under Satyabrata Ghose v. Mugneeram Bangur principles also failed at this stage: performance in India had not become unlawful under Indian law. SAP India was directed to restore full support services.
The order is interim; the suit continues. But the last uncontested position — two decades of continuous service — has been restored, and the burden of displacing it now lies on the defendants at trial.
Why this matters for Indian businesses
| Scenario | Consequence after Nayara |
|---|---|
| Indian subsidiary of a sanctioned-exposed multinational | Contractual obligations under Indian-law agreements survive; the parent\'s foreign compliance concerns are not a defence in an Indian court. |
| Contracts with an Indian governing-law and supremacy clause | Such clauses will be enforced literally; drafting them into critical service agreements is cheap insurance. |
| Reliance on foreign statutes in Indian litigation | Plead and prove them as facts through expert evidence; courts will not take judicial notice. |
| Business-critical services switched off unilaterally | Interim mandatory injunctions are available where the disruption threatens irreparable operational harm. |
The takeaway
Sanctions regimes are proliferating, and Indian companies increasingly find themselves collateral parties to geopolitical measures they had no part in. The Delhi High Court\'s answer is orthodox conflict-of-laws doctrine applied with rigour: identify the proper law of the contract, hold the parties to it, and require anyone invoking foreign law to prove it like any other fact. For counsel advising on technology and service agreements, the case is a reminder that the governing-law clause is not boilerplate — in this litigation, it was the whole case.
This article is for general information only and is not legal advice or a solicitation.
Frequently Asked Questions
Why did EU sanctions not excuse SAP India's performance?
Three reasons emerge from the order. The agreements were governed by Indian law and contained an express clause that in any conflict between foreign and Indian law, Indian law would prevail. EU regulations have no extraterritorial application to a purely domestic contract between two Indian companies performed in India. And foreign law is a question of fact in Indian courts — it must be proved by expert evidence, not judicially noticed.
Could SAP rely on frustration or a contingent contract?
The defendants invoked Sections 32 and 56 of the Indian Contract Act, 1872. The Court was not persuaded at the interim stage: the suspension flowed from the foreign parent's regulatory anxieties, not from performance having become unlawful or impossible under the law that actually governed the contract — Indian law.
What is an interim mandatory injunction and when is it granted?
Unlike a prohibitory injunction that preserves the status quo, a mandatory injunction at the interlocutory stage compels a party to do something — here, to restore services already switched off. Courts grant it sparingly, where the plaintiff's case is strong, the injury is serious and irreparable, and restoring the last uncontested position is necessary to prevent the suit itself becoming infructuous.
Does this decision bind foreign companies generally?
It is an interlocutory order in a pending suit, but its reasoning matters for any multinational operating through an Indian entity: obligations undertaken by the Indian entity under Indian-law contracts cannot be shed by pointing to foreign sanctions regimes, unless Indian law itself — through its own statutes or public policy — prohibits performance.