Delhi HC – Contractual Choice of Indian Law Prevails over Foreign Sanctions
Judgment dated 21.9.2026 of the High Court of Delhi in CS (COMM) 1006 of 2025 of NAYARA ENERGY LIMITED Vs. SAP INDIA PRIVATE LIMITED & ANR
The genesis of the contractual relationship between the plaintiff and defendant no. 1 lies in the SAP Software End-User Value License Agreement dated 17.08.2004 (in short ‘EULA’) executed between defendant no. 1 and Essar Steel India Limited (in short ‘Essar Steel’). 5. Under the terms of the EULA, defendant no.1 granted non-exclusive licenses (Perpetual in nature) to Essar Steel and its authorized affiliates for the use of specified SAP software products, subject only to the standard terms of payment and usage restrictions.
Thereafter, Essar Steel and Essar Oil had assignment agreement dated 22.6.2017 with the consent of SAP India as per section 10 of EULA. Clause 1 of the said AA provided had transferred the software licence and associated rights to Essar Oil for ensuring continuity of the core software ecosystem. Clause 3 required defendant no.1 to provide ongoing support services.
Thus, the plaintiff became the sole beneficiary of the EULA and the Assignment Agreement in view of the addition of the plaintiff to the EU sanctions list by EU Council.
The plaintiff has absolutely no viable alternatives. There is no other source for SAP Enterprise Support, and migration to other ERP systems would take years and cost hundreds of crores, besides causing massive disruptions. Without SAP support services, the plaintiff cannot avail maintenance services even from third parties since SAP systems involve proprietary code inaccessible to third parties. He submits that no third-party support can match SAP’s services, and the plaintiff’s decade-long expenditure of Rs. 8,88,15,791/- annually reflects the indispensable nature of these services.
Defendant no.1 (SAP India Pvt. Ltd.), which is a subsidiary of SAP SE Germany (parent company of defendant no.1) granted non-exclusive licenses (perpetual in nature) to Essar Steel and its authorized affiliates for the use of specified SAP software products. The rights in the said licenses were subsequently transferred by Essar Steel to Essar Oil Limited, the plaintiff’s earlier avatar, which was subsequently re-named as Nayara Energy Limited, the plaintiff herein, under the Assignment Agreement dated 22.06.2017.
The controversy in the present suit thus, revolves around the suspension or termination of support services which are distinct from the software licenses themselves, as the latter remain irrevocably vested in the plaintiff.’ the points which arise for consideration on the basis of rival contentions of the parties can broadly be put under the following categories:- (A) ‘Governing Law’ or ‘Proper Law of Contract’; (B) Applicability of EU Sanctions/Foreign Law; (C) Applicability of Section 32 and 56 of Indian Contract Act, 1872; (D) Specific Enforceability of various agreements; (E) Suppression of proceedings regarding the European Court of Justice [“ECJ”]; (F) Triple test for grant of mandatory injunction at interim stage.
To conclude, the “Governing Law” or “Proper Law of Contract” for all the agreements is the substantive domestic law of the Republic of India, therefore, the parties are legally bound by this expressly chosen law. Furthermore, the parties have consciously given overriding effect to the laws of India vis-à-vis foreign laws and regulations.
