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

In brief

The question

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

The court held

The Court answered the issues in the negative, holding that the impugned clauses are neither arbitrary nor unconstitutional.

It also directed

It ruled that there is no fundamental or vested right to the renewal of a liquor license.

The Court dismissed the batch of writ petitions, finding that the policy was uniform, rational, and within the State's executive domain.

All pending applications were disposed of accordingly.

01Facts

The petitioners, existing licensees of retail liquor shops, 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

The new policy 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.

¶ 3.1–3.3

If the 70% threshold was not met, or if any shop within a cluster remained unrenewed after a limited bidding process, the entire district or cluster was to be settled via e-auction.

¶ 3.3

The petitioners’ renewal applications were cancelled or not considered because certain shops within their clusters remained unrenewed, leading to the clusters being put for auction.

¶ 3.5–3.6

02Issues

i.1. Whether Clauses 2.2.6, 2.2.7, and 2.2.8 of the Excise & Temperance Policy 2025–2029 are arbitrary and violative of Article 14 of the Constitution.

¶ 2

ii.2. Whether an existing liquor licensee has a vested right to the renewal of their license under the Rajasthan Excise Act, 1950.

¶ 5.2 / 6.5.3

iii.3. Whether the State’s exercise of its "exclusive privilege" in liquor trade is subject to judicial review on the grounds of reasonableness.

¶ 4.1 / 6.3.3

03Law Applied

The Court applied Article 47 of the Constitution (Directive Principles regarding prohibition).

¶ 6.2

It applied Entries 8 and 51 of List II, Schedule VII, which grant the State exclusive power to regulate intoxicating liquors.

¶ 6.1

It relied on the landmark precedent Khoday Distilleries Ltd. v. State of Karnataka [(1995) 1 SCC 574] to affirm that liquor trade is res extra commercium (outside commerce) and no citizen has a fundamental right to trade in it.

¶ 6.3.2

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

¶ 6.5.3

While the State has "exclusive privilege," its actions must not be "manifestly arbitrary" under Article 14.

¶ 6.3.3

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 privilege and not a right, the State possesses wide discretion to formulate policies for revenue optimization and administrative stability.

¶ 6.3.4

The 70% district-wide renewal threshold and the "cluster" mechanism were viewed as rational policy tools to prevent "fallow areas" and ensure the settlement of less profitable shops alongside high-potential ones, thereby preventing illegal trade.

¶ 6.4.1, 6.5

The Court rejected the argument of "economic coercion," noting that renewal is voluntary and the petitioners had accepted the policy terms in their applications.

¶ 6.6.2

It was held that linking an individual's renewal to the conduct of the cluster/district is a collective mechanism for revenue security that does not constitute hostile discrimination.

¶ 6.4.2

The court concluded that judicial review cannot substitute "policy wisdom" with "judicial view" in fiscal matters unless patent illegality is shown.

¶ 6.7.1