State excise policy requiring cluster-based liquor license renewals and minimum district-wide participation is not unionstitutionally arbitrary.

The petitioners, existing liquor licensees, 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) a 70% renewal rate within the entire district, and (b) all shops within a specific cluster applying for renewal.

The petitioners had applied for renewal and paid fees, but their applications were cancelled/rejected because certain other shops within their assigned clusters remained unrenewed or the district threshold was not met, leading the Department to slate those clusters for fresh e-auction.

1. Whether Clauses 2.2.6, 2.2.7, and 2.2.8 of the Excise Policy 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 exercise of "exclusive privilege" in liquor trade is subject to judicial review and the requirement of Fairchild/transparency.

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 doctrine of "Res Extra Commercium," establishing that there is no fundamental right to trade in liquor under Article 19(1)(g).

It relied on the landmark precedent Khoday Distilleries Ltd. vs. State of Karnataka (1995), which clarifies that the State holds "exclusive privilege" over intoxicants, though its methods for granting licenses must not be "manifestly arbitrary" under Article 14.

It further applied Section 37 of the Rajasthan Excise Act, 1950, which stipulates that no licensee has a claim to renewal or compensation upon non-renewal.

The Court also invoked the principle of "Estoppel," noting that participants who accept policy terms to seek a benefit cannot challenge them after failing to secure that benefit.

The Court reasoned that since liquor trade is a regulated privilege rather than a right, the State possesses wide latitude to frame policies for revenue optimization and administrative efficiency.

The "cluster" mechanism and the 70% district-wide threshold were viewed as rational policy tools intended to prevent "fallow" (unserved) areas and ensure uniform liquor distribution, thereby curbing illegal trade.

The Court rejected the argument of arbitrariness, holding that linking a licensee’s renewal to the cluster’s collective performance is a legitimate fiscal strategy that applies uniformly to all.

It found that the petitioners’ grievances regarding "economic coercion" were unsubstantiated, as renewal is a voluntary commercial choice subject to the State's declared conditions.

Finally, the Court noted that judicial review cannot be used to substitute the "wisdom" of executive policy with judicial opinion unless there is a patent constitutional infirmity, which was not found here.

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

The Court dismissed the batch of writ petitions, upholding the Excise Department's decision to cancel renewals and proceed with e-auctions for clusters that failed to meet the policy's criteria.

All interim reliefs were vacated.