Excise policy conditions for cluster-based license renewal are not arbitrary and fall within State’s exclusive privilege.

The petitioners, existing liquor licensees, challenged the constitutional validity of Clauses 2.2.6, 2.2.7, and 2.2.8 of the Rajasthan Excise & Temperance Policy 2025–2029.

The Policy introduced a "cluster" system (grouping 1–5 contiguous shops) and made the renewal of individual licenses conditional upon: (a) at least 70% of eligible licensees in a district applying for renewal, and (b) all shops within a specific cluster applying for renewal.

The petitioner’s renewal application was cancelled because one shop in her assigned cluster remained unrenewed, and the cluster was subsequently slated for auction.

The petitioners alleged these conditions were arbitrary, coercive, and violated Article 14 by making their rights contingent on the actions of third parties.

The Court applied the principle that trade in liquor is res extra commercium, and thus a citizen has no fundamental right under Article 19(1)(g) to conduct business in intoxicants; it is a "privilege" exclusively owned and regulated by the State.

This doctrine was grounded in the precedent of Khoday Distilleries Ltd. v. State of Karnataka (1995).

Statutory authority was derived from Section 37 of the Rajasthan Excise Act, 1950, which explicitly states that no person has a claim to the renewal of a license.

The Court also invoked the principle of "Executive Wisdom" in policy matters, noting that judicial review is limited to testing "manifest arbitrariness" and does not extend to the economic or administrative merits of a policy.

The Court reasoned that because the State holds an "exclusive privilege" over liquor, it has wide discretion to determine the method of settlement to optimize revenue and prevent illegal trade in "fallow" areas.

The Court rejected the argument of arbitrariness regarding the 70% district threshold and cluster requirements, holding that such collective mechanisms are rational policy tools intended to ensure administrative stability and uniform revenue across a district.

The grouping of shops was deemed an administrative exercise within the Excise Commissioner’s competence.

Furthermore, the Court noted that the petitioners transitioned from "compliant licensees" to "challengers" only after failing to secure renewal, despite having signed undertakings accepting the Policy’s terms; thus, they were estopped from challenging the conditions after participating in the process.

The Court emphasized that it cannot substitute its wisdom for that of the executive in fiscal and regulatory matters.

The Court clarified that there is no fundamental or vested right to the renewal of a liquor license, and the cluster-based renewal conditions are constitutionally valid exercises of the State's regulatory power over an "exclusive privilege".

All prayers to quash the policy clauses and the consequential auction notices were denied.