State liquor policy prescribing cluster-based settlement and district-wise renewal thresholds is not termed as 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*.

The new policy introduced a "cluster" system (grouping 1–5 shops) and made the renewal of individual licenses conditional upon two factors: (i) at least 70% of eligible licensees in a district applying for renewal, and (ii) all shops within a specific cluster applying for renewal.

The petitioners had applied for renewal and paid the fees, but their applications were cancelled because other shops within their assigned clusters remained unrenewed, leading the Department to put the entire clusters up for e-auction.

The petitioners alleged these clauses were arbitrary, created unreasonable classifications, and amounted to economic coercion.

1. Whether Clauses 2.2.6, 2.2.7, and 2.2.8 of the Excise & Temperance Policy 2025–2029 are factorially arbitrary or discriminatory, violating Article 14 of the Constitution.

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

3. Whether the State's exercise of "exclusive privilege" in liquor trade is subject to judicial review under Article 226.

The Court applied the principle that there is no fundamental right to trade in liquor under Article 19(1)(g), as liquor is *res extra commercium*.

It relied on *Khoday Distilleries Ltd. v. State of Karnataka [(1995) 1 SCC 574]* to affirm the State's "exclusive privilege" to regulate or prohibit intoxicating liquors.

It further applied Section 37 of the *Rajasthan Excise Act, 1950*, which stipulates that no person has a claim to the renewal of a license.

The Court maintained that State action in this domain must still satisfy the test of non-arbitrariness under Article 14 of the Constitution, as held in *Secretary to Government, Tamil Nadu v. K. Vinayagamurthy*.

The Court reasoned that the formulation of excise policy is a matter of executive wisdom aimed at revenue optimization and administrative efficiency.

It found that the 70% district-wide threshold and the cluster-based renewal system were rational mechanisms intended to prevent "fallow areas" and "revenue leakage".

The Court rejected the argument of arbitrariness, noting that the policy applies uniformly across the State and that the petitioners had voluntarily applied for renewal under these specific terms, thereby attracting the principle of estoppel.

It observed that the State cannot be compelled to permit the selective renewal of only profitable shops while leaving non-viable shops in a cluster unsettled, as this would facilitate illegal trade in unregulated areas.

Since the petitioners failed to prove "manifest arbitrariness" or *mala fides*, the Court declined to substitute its judgment for that of the executive.

It affirmed that the petitioners have no fundamental or vested right to renewal and must comply with the conditions prescribed by the State in exercise of its exclusive privilege.

The Court dismissed the batch of writ petitions, thereby upholding the cancellation of the petitioners' renewal applications and the subsequent auction of the liquor clusters.