State excise policy requiring 70% district-wide participation for license renewal is not manifesty arbitrary.

The petitioners, existing liquor licensees in Rajasthan, challenged the constitutional validity of Clauses 2.2.6, 2.2.7, and 2.2.8 of the Excise and 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 two collective thresholds: (i) at least 70% of eligible licensees in a district must apply for renewal, and (ii) all shops within a specific cluster must be renewed.

The petitioners had applied for renewal and paid fees, but their applications were cancelled because either the district failed the 70% threshold or specific shops within their clusters remained unrenewed, leading to the clusters being put up for e-auction.

1. Whether Clauses 2.2.6, 2.2.7, and 2.2.8 of the Excise Policy are manifesty arbitrary and violative of Article 14 by making an individual's renewal contingent on the actions of third parties.

2. Whether the State’s power to regulate "res extra commercium" (liquor) exempts it from the constitutional requirement of non-arbitrariness and fairness.

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

The Court primarily relied on the principle that while the State has an "exclusive privilege" regarding intoxicating liquors under Entry 8 and 51 of List II, and such trade is res extra commercium (not a fundamental right under Article 19(1)(g)), the State must still act non-arbitrarily under Article 14.

It further applied Section 37 of the Rajasthan Excise Act, 1950, which stipulates that no person has a claim to the renewal of a license.

The doctrine of estoppel was also invoked, as petitioners participated in the process after accepting the policy's terms.

The Court reasoned that the 70% district threshold and cluster-based settlement are policy tools designed for revenue optimization, administrative efficiency, and the prevention of "fallow areas" that encourage illegal trade.

It held that the linking of individual renewals to collective participation does not constitute "manifest arbitrariness" because the rules apply uniformly across the State to all licensees.

The Court emphasized that it cannot substitute its wisdom for executive policy in fiscal matters unless there is a patent constitutional violation.

Since the petitioners had no vested right to renewal under Section 37 of the Act and had voluntarily submitted to the policy’s conditions by applying, they could not challenge the mechanism after failing to secure a renewal.

The cluster system was deemed a rational method to ensure that low-viability shops are settled alongside high-potential ones to protect State revenue.

It held that: (1) there is no fundamental right to trade in liquor or to the renewal of a license.

(2) the cluster and threshold mechanisms are rational policy decisions within the State's competence.

And (3) no "hostile discrimination" or constitutional infirmity was demonstrated.

The Court declined to quash the auction notices or direct renewals, stating that judicial review does not extend to the economic merits of policy choices.