State may link individual liquor license renewals to cluster-wide participation and district-level revenue thresholds.

In brief

The question

Whether Clauses 2.2.6, 2.2.7, and 2.2.8 of the Excise Policy 2025–2029 are constitutionally valid under Article 14, or if they are "manifestly arbitrary" by making an individual’s renewal contingent on the actions of third parties.

The court held

The High Court answered the issues in the negative and dismissed the writ petitions.

It also directed

It held that: (i) the impugned clauses are not "manifestly arbitrary" as they are based on rational fiscal and administrative objectives; and (ii) under Section 37 of the Rajasthan Excise Act and settled Supreme Court precedents, the petitioners have no vested right to renewal.

The Court refused to interfere with the State's policy wisdom, confirming that the cluster-based auction process was valid.

01Facts

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.

¶ 3.6

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

¶ 3.1–3.3

If these conditions were not met, the shops were liquidated through e-auction, effectively cancelling the petitioners' pending renewal applications despite their individual eligibility and payment of fees.

¶ 3.5

The petitioners alleged these clauses were arbitrary and coercive.

¶ 4.3

02Issues

i.Whether Clauses 2.2.6, 2.2.7, and 2.2.8 of the Excise Policy 2025–2029 are constitutionally valid under Article 14, or if they are "manifestly arbitrary" by making an individual’s renewal contingent on the actions of third parties.

¶ 3.6, 6.3.3

ii.Whether an existing licensee has a vested or fundamental right to the renewal of a liquor license.

¶ 4.1, 6.3.1

03Law Applied

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.

¶ 6.3.1–6.3.2

It relied on Khoday Distilleries Ltd. v. State of Karnataka [(1995) 1 SCC 574], establishing that the State holds "exclusive privilege" over intoxicants and can create a monopoly or impose restrictive conditions on its trade.

¶ 4.2.1, 6.3.2

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

¶ 5.2, 6.5.3

Finally, it applied the doctrine of limited judicial review in policy matters, asserting that courts should not substitute executive wisdom with judicial opinion unless the policy is patently arbitrary.

¶ 6.3.4–6.3.5

Provisions in the judgment · 1 · Linked ones open on LawLens

rajasthan excise act, 1950 Section 37

04Reasoning

The Court reasoned that since liquor trade is a regulated privilege rather than a right, the State possesses wide discretion to determine the "manner" of settlement to optimize revenue and prevent illegal trade in "fallow areas".

¶ 6.1, 6.4.3

The Court rejected the argument of arbitrariness, noting that the 70% district-wide threshold and cluster requirements are neutral, uniform administrative tools designed to ensure "substantial participation" and "stability" across the State.

¶ 6.4.1–6.4.2

It found that linking an individual's renewal to group performance (the cluster) is a valid regulatory strategy to prevent vendors from only picking "high-potential" shops while leaving non-viable ones to fuel bootlegging.

¶ 5.9, 6.5

Furthermore, the Court noted that the petitioners had submitted renewal applications with full knowledge of these conditions, thereby attracting the principle that one cannot challenge the rules of a process after participating and failing to secure the desired outcome.

¶ 5.7, 6.6.2–6.6.3