State liquor policy conditioning license renewal on district-wide participation thresholds and cluster-based settlement is constitutionally valid.

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 1–5 shops) and set a district-level renewal threshold.

The petitioners’ renewal applications were cancelled because their specific clusters contained unrenewed shops or the district failed to meet a 70% renewal mandate, leading the State to initiate fresh e-auctions for those clusters.

The petitioners argued these clauses were arbitrary and coercive, making an individual’s right to renew contingent on the actions of third parties.

The court applied the principle that trade in intoxicating liquor is res extra commercium, meaning no citizen has a fundamental right under Article 19(1)(g) to conduct such business; it is a "privilege" regulated by the State under Entry 8 and 51 of List II.

Reliance was placed on Khoday Distilleries Ltd. v. State of Karnataka (1995), establishing the State's exclusive privilege to create monopolies or restrictions in liquor trade.

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, the "Doctrine of Estoppel" was applied to parties who participate in a process after accepting its terms.

The Court reasoned that since liquor trade is a privilege and not a right, judicial review is limited to testing "manifest arbitrariness".

The Court found that the 70% district-wide threshold and the cluster mechanism were rational policy tools intended to ensure revenue stability, prevent fragmented settlements, and stop the creation of "fallow" unregulated areas where illegal trade might sprout.

Linking an individual's renewal to the cluster's collective status was deemed a valid administrative exercise for revenue optimization.

The Court rejected the plea of "economic coercion," noting that renewal is voluntary and the petitioners had signed undertakings accepting these specific policy conditions.

It held that the State is not required to permit the "cherry-picking" of profitable shops while leaving non-viable shops unsettled.

The Court held that the policy was a matter of executive wisdom and did not suffer from horizontal discrimination, as it applied uniformly to all licensees in the State.

Consequently, the High Court dismissed the batch of writ petitions, upholding the State's right to cancel renewals and proceed with cluster-wise e-auctions.