State excise policy conditions tying individual license renewals to district-wide and cluster-level participation thresholds are constitutionally valid.

The petitioners, existing licensees of retail liquor shops in Rajasthan, 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 new 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 opting for renewal.

The petitioners, despite fulfilling individual eligibility and paying fees, had their renewal applications cancelled because either the district threshold was not met or other shops within their assigned clusters remained unrenewed, leading the Department to slate the clusters for public e-auction.

1. Whether Clauses 2.2.6, 2.2.7, and 2.2.8 of the Excise Policy 2025-2029 are arbitrary, discriminatory, and violative of Article 14 of the Constitution by making an individual’s renewal dependent on the actions of third parties.

2. Whether the State’s power to regulate "exclusive privilege" in liquor trade exempts its policy decisions from judicial review on the grounds of reasonableness.

3. Whether an existing licensee possesses a vested right to the renewal of a liquor license under the Rajasthan Excise Act, 1950.

The Court applied the principle that while the State holds "exclusive privilege" over intoxicating liquors under Entry 8 and 51 of List II (Seventh Schedule), and such trade is *res extra commercium* (beyond commerce) with no fundamental right under Article 19(1)(g), State action must still satisfy the non-arbitrariness test of Article 14.

It relied on *Khoday Distilleries Ltd. v. State of Karnataka* [(1995) 1 SCC 574], establishing that the State may create a monopoly or impose restrictive conditions on liquor trade.

Furthermore, Section 37 of the *Rajasthan Excise Act, 1950* was applied, which explicitly mandates that no person has a claim to the renewal of a license.

The Court reasoned that since liquor trade is a privilege and not a right, the State enjoys wide latitude in framing policies for revenue optimization and administrative efficiency.

It found that the 70% district-wide threshold and the cluster mechanism were rational policy tools designed to prevent "fallow" (unserved) areas and ensure stable revenue collection.

The Court rejected the argument of "economic coercion," noting that renewal is voluntary and subject to declared policy conditions.

It further observed that the petitioners were estopped from challenging the policy after having participated in the renewal process and signing undertakings to abide by the policy's terms.

The Court emphasized that it cannot substitute its own economic or administrative wisdom for that of the executive unless manifest arbitrariness is proven, which the petitioners failed to demonstrate.

It ruled that there is no fundamental or vested right to the renewal of a liquor license, and the State’s uniform application of the cluster system is a valid exercise of its regulatory power.

Consequently, the High Court dismissed the entire batch of writ petitions, upheld the cancellation of the petitioners' renewal applications, and permitted the State to proceed with the e-auctions.