State excise policy requiring cluster-based liquor license renewals and minimum district thresholds is not fetchingly arbitrary.

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 *Excise and Temperance Policy 2025–2029*.

Under this new policy, the State introduced "clusters" (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.

If these conditions were not met, the shops were subject to cluster-wise e-auctions.

The petitioners’ renewal applications were cancelled because certain shops within their assigned clusters remained unrenewed or the district threshold was not met, leading the Department to propose auctions for those clusters.

1. Whether Clauses 2.2.6, 2.2.7, and 2.2.8 of the Excise Policy 2025–2029 are arbitrary 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 exercise of its "exclusive privilege" in liquor trade is subject to judicial review despite the absence of a fundamental right to trade in intoxicants.

3. Whether the cluster-based auction mechanism constitutes "economic Coercion" or unjust enrichment by clubbing viable shops with non-viable ones.

The Court applied the doctrine of "exclusive privilege" under Entry 8 and Entry 51, List II of the Seventh Schedule, noting that the State has total control over the liquor trade.

It relied on *Khoday Distilleries Ltd. v. State of Karnataka [(1995) 1 SCC 574]* to affirm that liquor is *res extra commercium* and no citizen has a fundamental right under Article 19(1)(g) to trade in it.

However, it acknowledged that State action must still comply with Article 14 (non-arbitrariness), as held in *Secretary to Government, Tamil Nadu v. K. Vinayagamurthy*.

Finally, it applied Section 37 of the *Rajasthan Excise Act, 1950*, which specifies that no person has a vested right or 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 discretion in formulating excise policies to optimize revenue and prevent unregulated "fallow" areas.

The 70% district threshold and cluster conditions were viewed as rational policy tools to ensure administrative stability and collective responsibility in the trade.

The Court rejected the argument of arbitrariness, noting these conditions applied uniformly across the State.

It further observed that the petitioners had signed undertakings accepting the policy terms when applying for renewal, thus creating an estoppel against challenging the policy once the outcome became unfavorable.

The Court emphasized that it cannot substitute its own wisdom for executive policy unless there is "manifest arbitrariness," which the petitioners failed to demonstrate.

The Court held that renewal is not an absolute right and the State is entitled to use cluster mechanisms to protect its revenue interests.

The prayer to quash the auction notices was denied, and all pending applications were disposed of.