State excise policy requiring 70% district-wide renewal for individual liquor license renewal is not 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 Rajasthan Excise & Temperance Policy 2025–2029.

Under this new policy, the State introduced a "cluster" system (grouping 1–5 contiguous shops) and made the renewal of individual licenses conditional upon two factors: (i) at least 70% of eligible licensees in a district applying for renewal, and (ii) all shops within a specific cluster opting for renewal.

The petitioners’ renewal applications were cancelled because certain shops within their assigned clusters remained unrenewed, leading the Department to propose settling those clusters via open e-auction.

The petitioners alleged these conditions were arbitrary, coercive, and violated Article 14 of the Constitution.

1. Whether Clauses 2.2.6, 2.2.7, and 2.2.8 of the Excise & Temperance Policy 2025–2029 are constitutionally valid or suffer from manifest arbitrariness under Article 14.

2. Whether a licensee has a fundamental or vested right to the renewal of a liquor license under the Rajasthan Excise Act, 1950.

The Court primarily applied the principle that there is no fundamental right to trade in liquor under Article 19(1)(g), as potable liquor is res extra commercium; the State holds "exclusive privilege" over its trade.

This doctrine was reinforced by the precedent in Khoday Distilleries Ltd. v. State of Karnataka [(1995) 1 SCC 574], which established that while the State has total control, its regulatory methods must not be "manifestly arbitrary."

Statutory weight was given to 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 reasoned that the formulation of excise policy is a matter of executive wisdom aimed at revenue optimization and preventing illegal liquor trade in "fallow" or unsettled areas.

It held that the 70% district-wide threshold and the cluster-based renewal requirements are rational regulatory mechanisms designed to ensure administrative stability and fiscal uniformity.

The Court rejected the argument of "economic coercion," noting that renewal is a voluntary choice subject to policy terms.

Furthermore, the Court observed that the petitioners had signed undertakings accepting these policy conditions when they initially applied for renewal; therefore, they were estopped from challenging the policy after the outcome proved unfavorable.

Since the policy applied uniformly across the State and served a legitimate State interest (revenue protection), it did not violate the "intelligible differentia" test of Article 14.

The Court answered that a citizen has no fundamental or vested right to the renewal of a liquor license, and judicial review cannot substitute the State’s policy wisdom in fiscal and regulatory matters.

All pending applications were disposed of accordingly.