State liquor policy conditions for cluster-based license renewal are not arbitrary and do not violate Article 14.

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 where shops (1 to 5) are grouped contiguously.

Renewal of an individual license was made conditional upon: (a) at least 70% of eligible licensees in the district applying for renewal, and (b) all shops within a specific cluster applying for renewal.

If these conditions failed, the shops/clusters were subjected to e-auction.

The petitioners, despite fulfilling individual eligibility and paying fees, had their renewal applications cancelled because either the district-wide 70% threshold was not met or other shops in their assigned clusters remained unrenewed.

They alleged these clauses were arbitrary, coercive, and violated Article 14 of the Constitution.

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 of India.

2. Whether a licensee has a fundamental or vested right to the renewal of a liquor license under the Rajasthan Excise Act, 1950.

The Court applied the principle that trade in liquor is res extra commercium, meaning there is no fundamental right to carry on business in intoxicants under Article 19(1)(g).

It relied on the landmark precedent Khoday Distilleries Ltd. v. State of Karnataka (1995), establishing that the State holds "exclusive privilege" over liquor and can create a monopoly or impose restrictive conditions on its trade.

Section 37 of the Rajasthan Excise Act, 1950 was applied, which stipulates that no person has a claim to the renewal of a license as a matter of right.

The Court also invoked the "Doctrine of Estoppel," noting that candidates who participate in a process after accepting policy terms cannot challenge those terms upon an unfavorable outcome.

The Court reasoned that while liquor trade is a regulated privilege, State action must still meet the "non-arbitrariness" test of Article 14; however, judicial review of such policy is limited to "manifest arbitrariness".

The Court found that the 70% district-wide threshold and the cluster mechanism were valid tools of executive "policy wisdom" aimed at revenue optimization, administrative efficiency, and preventing "fallow areas" where illegal liquor trade might flourish if shops remained unsettled.

The Court rejected the argument of "economic coercion," stating that renewal is voluntary and the State is entitled to group shops to ensure collective settlement of both profitable and non-viable units.

Significantly, the Court noted that approx. 6,420 out of 7,665 licensees had accepted and opted for renewal under this very cluster system, indicating broad industry acceptance.

Since the petitioners signed undertakings accepting the policy terms during application, they were estopped from challenging the framework post-facto.

The Court answered both issues in the negative, affirming that there is no fundamental right to liquor license renewal and the cluster system is a valid exercise of State power.

The High Court dismissed the entire batch of writ petitions and vacated all pending applications, upholding the State's right to proceed with the e-auctions.