Nayara's Legal Strategy in the SAP India Decision: A Review

There have been thousands of posts on LinkedIN and in the internet on the Delhi High Court’s decision in Nayara v SAP. This post is not about the judgment but about Nayara’s legal strategy. Often, the victor (in this case temporary victor) alone gets appreciated. But in a situation of uncertainty and tremendous pressure, Nayara’s legal strategy seems to have worked. This post is an examination of Nayara’s strategy.

European Union Regulation (EU) 2025/1476 dated 18.07.2025 amended the EU Regulation (EU) No 269/2014, which had the effect of declaring business with the Nayara as prohibited. The Sanctions List stated:

“Nayara Energy Limited is an entity established in India and operating an important refinery in Vadinar. That refinery is 49 % owned by the Russian State oil company Rosneft, and is a major refiner of Russian crude oil. The energy sector, in particular the oil sector, is a sector providing substantial revenue to the Russian Government. Therefore, Nayara Energy is involved in an economic sector providing a substantial source of revenue to the Government of the Russian Federation, which is responsible for the annexation of Crimea and the destabilisation of Ukraine.”

This prompted Microsoft and SAP to stop services to Nayara. Nayara sued SAP and Microsoft (here). As per information available in the public domain, Microsoft restored services before the case went for hearing (here). On the other hand, SAP did not. So Nayara sued SAP in the Delhi High Court.

The proceedings against SAP led to a decision dt. 21.09.2026 by the Delhi High Court on interim application for restoration of services. In the judgment, Hon’ble Mr. Justice Vikas Mahajan ordered:

“276. Under the facts and circumstances discussed hereinabove, the application is allowed and the defendant no.1 is directed to restore the status quo ante as it existed prior to 24.07.2025, by immediately resuming all enterprise and software support services to the plaintiff under the respective agreements.”

The judgment, it may be noted, was an interim order: "277. It is clarified that the observations made hereinabove are purely prima facie in nature for the purpose of adjudicating the present application under Order XXXIX Rules 1 & 2 CPC and shall not have any bearing on the final adjudication of the suit on merits..”

The events unfolded this way: Nayara was included in the Sanctions List on 18.07.2025, which was a Friday. On 24.07.2025, Thursday, SAP India cited the EU Council Regulation and suspended the access to SAP Portal. On 20.09.2025, Nayara sued SAP India in the Delhi High Court.

Nayara relied on the governing law clauses in the contract (General Terms and Conditions-GTC) with SAP, which provided for Indian law as the Governing law and exclusive jurisdiction with Delhi courts. The agreements, interestingly, did not provide for arbitration. Nayara's legal action against Microsoft was perhaps filed under Section 9 of the Arbitration and Conciliation Act, 1996.

Coming back to the SAP case, the GTC also contained another interesting clause: “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.”

Nayara’s strategy was to heavily rely on the governing law and the conflicts clauses to argue that EU law on sanctions was not applicable.

The second legal strategy was to rely on Section 52(1) of Bharatiya Sakshya Adhiniyam, 2023 [Section 57(1) of the Indian Evidence Act, 1872] and argue that EU law/ foreign law was not covered in BSA. While expert evidence could be led on foreign law, it was not binding on Indian courts.

The third part of the strategy was to contend that the onus of proving EU Regulations and the laws of Germany was on SAP India, which relied on these. The court was of the view that all these things had to be proved during trial, especially since expert witnesses had to be cross-examined.

The fourth strategy was this: the contract contained a trade sanctions clause. It stated that the software delivered shall be subject to export law of US, EU, etc. However, Nayara relied on a crucial omission in the clause: it covered only software and documentation but did not cover support services.

The fifth legal strategy was to overcome SAP’s argument that owing to force majeure circumstances, SAP could not offer its services considering Sections 32 and 56 of the Contract Act. This was done by arguing that:

• There was no force majeure as contended by SAP because the EU Regulations was yet to be proven in court and therefore it could not be relied on to argue that performance was impossible. In the words of the court, this was the “fundamental hurdle” for SAP.
• Commercial hardship was not impossibility: SAP’s argument was not that support services had to be routed only through SAP Germany. There was no requirement that the services had to be from Europe.
• The territory licence from SAP was worldwide and therefore SAP could not argue to restrictively read it.
• Technical support services could be offered through any country.

The sixth strategy was a purely legal approach: overcoming the hurdles in the Specific Relief Act, 1963: courts cannot specifically enforce an agreement which is by its nature determinable, which runs into minute details such that court cannot enforce its material terms and performance of the agreement involves continuous duty which the court cannot supervise. These would have probably been taken care of by its external counsel. Nayara argued that the concerned agreement was specifically enforceable: it was not by its nature determinable, as it did not contain a clause for termination for convenience.

The seventh legal strategy was to argue that the agreement did not allow SAP to terminate it on account of foreign sanctions.

SAP came up with a brilliant counterargument: there was a trade sanctions clause in one of the instruments forming the contract: the Delivered Support Agreement, and that therefore all the concerned instruments formed a composite agreement. Unfortunately, SAP’s pleadings did not support this argument. One crucial omission in SAP’s pleadings, which was heavily relied on by Nayara was that SAP did not rely on a specific agreement or a clause to support its actions. Also, Nayara’s stance, which was upheld by the court, was that the instruments did not form a composite agreement:

• the Delivered Support Agreement (DSA) which contained the sanctions clause did not refer to the other instruments- the Order Forms and the Support Schedule.
• The DSA was to be provided through a partner (Def. No. 2) only in respect of specific modules.
• The territory in the DSA was only India while the other agreements was worldwide.
• Also, the fee for the DSA was miniscule as compared to the other instruments.

The minute details as a defence against specific relief was countered by Nayara by arguing that this defence is no more available in view of the amendments to the Specific Relief Act in 2018. As regards the arguments regarding continuous duty which court had to supervise, Nayara argued that the relationship between the parties had been going on over a decade and that the agreement encapsulated the obligations of the parties.

No matter how good a party’s strategy are, in an interim relief stage, the triple test had to be pleaded and established: prima facie case, balance of convenience and irreparable injury. Nayara argued that such abrupt and unilateral suspension of services was ex facie illegal. For irreparable injury and balance of convenience, Nayara argued that migration to alternative frameworks made the entire software ecosystem to vulnerabilities, especially in the background of the current geopolitical situation.

Nayara also pleaded that it contributed to 8% of India’s energy needs and therefore uninterrupted flow of tech support was required. SAP did not contest this. This was important in an energy scarce nation like India. On the other hand, Nayara argued and the court found that no injury would be caused to SAP and there was no real or imminent threat of prosecution for performing its obligations.

Ultimately, Nayara’s application for restoration of status quo ante under Order 39 Rules 1 and 2 (interim injunctions) was allowed. The Delhi High Court’s decision can be accessed from here.

Victories in courts are a combination of excellent arguments by counsels, deep insight of in-house counsels and the tech and financial teams, and some luck. The judgment depicts intense application of mind by the parties. Despite odds, Nayara’s strategy seems to have found success, at least for now. Given the involvement of sanctions, it is most likely that SAP will appeal against the decision.

[Note: Image in this post made through AI is entirely fictional and is not related to Nayara]