State excise policy thresholds and cluster-based renewal conditions are valid exercises of regulatory privilege.

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 shops) and mandated that renewal of individual licenses in a district was conditional upon at least 70% of eligible licensees in that district applying for renewal.

The petitioner in the lead case applied for renewal, but because one shop in her assigned cluster remained unrenewed, her application was cancelled in favor of a cluster-wide auction.

The petitioners argued that making their individual renewal rights contingent upon the actions of third parties or district-wide percentages was arbitrary and coercive.

The Court applied the "Privilege Doctrine" regarding trade in intoxicants, noting that under Entry 8 and 51 of List II of the Seventh Schedule, the State holds exclusive privilege.

It relied on the principle from Khoday Distilleries Ltd. v. State of Karnataka [(1995) 1 SCC 574] that there is no fundamental right to trade in liquor as it is res extra commercium, and the State may create a monopoly or impose restrictive conditions.

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

Finally, it applied the principle that while Article 14 requires non-arbitrariness in State action, judicial review of economic policy is limited to "manifest arbitrariness".

The Court reasoned that the 70% district-wide threshold and the cluster mechanism are policy tools designed for revenue optimization, administrative efficiency, and the prevention of "fallow" unregulated areas.

The Court found that linking individual renewals to collective participation is a rational regulatory strategy to ensure comprehensive settlement of shops rather than selective "cherry-picking" of high-potential outlets by vendors.

It rejected the plea of "economic coercion," holding that renewal is a voluntary choice subject to the State's declared conditions.

Crucially, the Court noted that the petitioners had signed undertakings accepting these policy terms when applying, thus estopping them from challenging the criteria after failing to secure renewal.

The Court concluded that the petitioners failed to demonstrate "hostile discrimination" as the policy applied uniformly across the State.

The Court held that a citizen has no fundamental or vested right to the renewal of a liquor license, and the State’s policy choices regarding the "cluster" system and renewal thresholds fall within its executive wisdom and regulatory privilege.

All interim reliefs were vacated.