State excise policy requiring cluster-based liquor license renewals and minimum district thresholds is not discriminatory or 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".

The new policy introduced a "cluster" system (grouping 1 to 5 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 petitioner’s renewal application in Barmer was cancelled because one shop in her assigned cluster remained unrenewed, leading the Department to put the entire cluster up for e-auction.

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

1. Whether Clauses 2.2.6, 2.2.7, and 2.2.8 of the Excise & Temperance Policy 2025-2029 are "manifestly arbitrary" or discriminatory under Article 14 of the Constitution.

2. Whether an existing licensee has a vested or fundamental right to the renewal of a liquor license.

3. Whether the State’s exercise of "exclusive privilege" in liquor trade is subject to judicial review under Article 226.

The Court applied the doctrine of "exclusive privilege" of the State in the trade of intoxicating liquors as per Entry 8 and Entry 51 of List II, Seventh Schedule, and the Directive Principle under Article 47 of the Constitution.

It relied on the landmark precedent in Khoday Distilleries Ltd. v. State of Karnataka (1995), which established that while liquor is res extra commercium and no fundamental right to trade exists under Article 19(1)(g), State action must still be non-arbitrary under Article 14.

The Court also applied Section 37 of the Rajasthan Excise Act, 1950, which stipulates that no person has a statutory claim to the renewal of a license.

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

It held that the 70% district-wide threshold and the cluster-based renewal system were rational policy tools intended to prevent "fallow areas" and "revenue leakage."

The Court rejected the argument of "economic coercion," stating that renewal is a voluntary choice subject to the policy’s declared conditions.

The Court noted that the petitioners had signed undertakings accepting the policy terms when applying, thus invoking the principle of estoppel.

It further observed that over 6,420 licensees had successfully opted for renewal under this system, proving its general workability and lack of "manifest arbitrariness."

The Court answered that there is no fundamental or vested right to renewal of a liquor license.

The State’s decision to link individual renewals to cluster/district performance was upheld as a valid exercise of executive wisdom aimed at safeguarding public revenue.

All interim reliefs were vacated, and the challenge to the cancellation of renewal applications was rejected.