Mint Explainer: What the Nayara vs SAP ruling means for Indian contracts caught in foreign sanctions

The Delhi High Court’s interim order directing SAP India to restore services to Nayara Energy reinforces the primacy of local contract law without granting Indian firms blanket immunity from foreign sanctions, experts said.

The Delhi High Court on Monday directed SAP’s Indian subsidiary to restore software and enterprise support services to Nayara Energy, which were suspended after the oil refiner was placed on the European Union’s sanctions list over its Russian links.

The interim order provided relief to Nayara, which argued that the suspension threatened its critical infrastructure.

Mint explains what the Delhi High Court ruled, whether foreign sanctions can be relied upon to suspend services to an Indian company, and what the order means for companies dependent on critical technology services.

What is the dispute about?

The dispute concerns SAP’s support and maintenance services, including access to the SAP Support Portal, software patches, licence-key generation and technical assistance.

Nayara had been using SAP software under agreements with SAP India since 2017, followed by a SAP Delivered Support Agreement in March 2019.

EU sanctions on Nayara took effect on 20 July 2025. Nayara was listed because its Vadinar refinery is 49% owned by Russian state oil company Rosneft and processes Russian crude.

On 24 July 2025, SAP India suspended Nayara’s support services and blocked access to the SAP Support Portal, citing the EU sanctions. Nayara asked SAP to restore the services on 29 August. On 2 September, SAP said it was compelled to comply with applicable sanctions and export-control laws.

Nayara approached the Delhi High Court in September 2025, arguing that the contracts were between SAP India and Nayara, both Indian companies, and were governed by Indian law. SAP argued that its German parent, SAP SE, was bound by EU sanctions.

What did the high court rule?

In an interim order dated 21 September, the Delhi High Court directed SAP India to restore the arrangement that existed before 24 July 2025 and resume software and enterprise support services to Nayara. The court noted that the agreements are governed by Indian law, which takes precedence in the event of any conflict with foreign regulations.

At the interim stage, the court rejected SAP’s argument that EU sanctions made it impossible to fulfill the contract. It held that foreign sanctions are a matter of overseas law and that their applicability and impact on an Indian agreement must be pleaded and proven during trial, and cannot simply be presumed by an Indian court. The court also noted that Nayara’s refinery accounts for about 8% of India’s energy needs and that continued SAP support was important for its critical operations.

SAP had argued that continuing services could expose its German parent company to criminal proceedings in Germany. The court found this defense unpersuasive on the face of it, noting that the order applies strictly to SAP India, the local contracting entity.

The court clarified that these observations are preliminary and subject to the final trial outcome. However, SAP retains the option to challenge the interim ruling before a division bench of the high court to seek an immediate stay.

What does the ruling mean for Indian companies facing foreign sanctions?

According to Smrithi Nair, partner at Juris Corp, the order could provide relief to Indian companies facing foreign sanctions, but does not amount to immunity from sanctions.

“This ruling provides an impetus for Indian companies that may be facing foreign sanctions, and is a significant affirmation that foreign sanctions must be proved as a matter of fact before an Indian court, and in that sense, foreign sanctions are not automatic,” Nair said.

Nair added that the case underscores the need for meticulous drafting of key contractual terms, particularly those covering governing law, sanctions, force majeure, service continuity, and suspension rights.

Ankit Rajgarhia, partner at Bahuguna Law Associates, said foreign sanctions do not automatically override an Indian contract law, but the ruling does not provide a blanket exemption from sanctions. Companies dependent on critical technology should negotiate protections against sanctions-related disruption, he added.

What does it mean for India's digital sovereignty?

The case highlights India's dependence on foreign technology providers for critical business infrastructure. Nair from Juris Corp called it a “live example of the implications that foreign sanctions could have on Indian business”, saying developments outside India can “test such dependency and create operational risks.” She said the ruling also offers insight into how Indian courts may approach similar disputes involving foreign sanctions and critical technology.

However, Akshat Pande, managing partner at Alpha Partners, said the order is an interim injunction based on the specific facts of the case and should not be seen as settling the broader question of how foreign sanctions affect Indian companies.

According to Anupam Shukla, partner at Pioneer Legal, the case highlights India’s reliance on foreign tech providers rather than solving it. He noted Nayara’s argument that SAP’s proprietary software lacks immediate alternatives, cannot be serviced by third parties, and would take years and hundreds of crores to replace.

“This gap is the real vulnerability. A compliance decision taken in Brussels or Washington can effectively act as a kill switch on Indian critical infrastructure, with no Indian regulator or court involved until after the damage is done. Expect this to sharpen the push for sovereign cloud requirements, in-country support obligations in critical-sector contracts, and possibly an Indian version of the blocking statute the EU itself uses," he said.

Is this the first such case?

No. In July 2025, Microsoft also suspended services to Nayara, including access to Outlook and Teams, following the EU sanctions. Nayara approached the Delhi High Court, and by 30 July, Microsoft had issued clarifications and reinstated Nayara’s services.

About the Author

Krishna Yadav is a Senior Correspondent at Mint, based in New Delhi, and part of the corporate bureau. He joined the newsroom as a trainee in 2023 and quickly grew into his current role. He writes on legal and regulatory developments in corporate India, with a focus on insolvency, taxation, company law, and policy. His reporting includes tracking and breaking key legal stories from the Supreme Court, Delhi High Court, NCLT, and NCLAT.<br><br>With a background in law, Krishna is known for simplifying complex legal developments into clear, accessible stories for readers. His work focuses on trends in corporate law and policy that affect businesses. This ranges from explaining tax disputes—like whether coconut hair oil is edible—to writing on why celebrities are seeking personal rights protection. He closely tracks India’s insolvency system, covering issues such as creditor losses, gaps in the process, and challenges in how the framework works in practice.<br><br>Krishna also tracks developments within law firms—covering hiring trends, how firms help companies navigate global challenges, and how the legal industry is adapting to artificial intelligence. Beyond legal reporting, he has written long-form pieces, including on-ground coverage of the 2024 general elections, capturing the scale and logistics of polling across India.<br><br>Outside work, he enjoys travelling, exploring new places, and reading about geopolitics and history.