State may link liquor license renewal to collective cluster-based performance thresholds without violating Article 14.

The petitioners, existing liquor licensees in Rajasthan, challenged the "Excise and Temperance Policy 2025-2029" issued via notification dated 29.01.2025.

The policy introduced a "cluster" system (grouping 1–5 shops) and mandated that renewal of individual licenses in a district was conditional upon: (a) at least 70% of eligible licensees in that district applying for renewal, and (b) all shops within a specific cluster opting for renewal.

The lead petitioner’s renewal application was cancelled because one shop in her assigned cluster remained unrenewed, triggering a proposed auction of the entire cluster.

Petitioners argued 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 and Temperance Policy 2025-2029 are constitutionally valid under Article 14.

2. Whether a licensee has a fundamental or vested right to the renewal of a liquor license.

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

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

It relied on Khoday Distilleries Ltd. v. State of Karnataka [(1995) 1 SCC 574], establishing that the State holds "exclusive privilege" over intoxicating liquors and can create a monopoly.

However, per Secretary to Government, Tamil Nadu v. K. Vinayagamurthy, State action remains subject to Article 14 scrutiny for manifest arbitrariness.

Statutory reliance was placed on Section 37 of the Rajasthan Excise Act, 1950, which stipulates that no person has a claim to the renewal of a license.

The Court reasoned that the 70% renewal threshold and cluster mechanisms are matters of executive policy intended to optimize revenue, prevent unregulated "fallow areas," and ensure administrative stability.

It held that the linking of individual renewals to collective district/cluster performance is a rational regulatory tool and does not constitute "hostile discrimination" because the rules apply uniformly to all licensees.

The Court rejected the plea of "economic coercion," noting that renewal is voluntary and the State is not obliged to permit the selective renewal of only high-profit shops while leaving non-viable shops unsettled.

Furthermore, since the petitioners accepted the policy terms in their renewal applications, they were estopped from challenging the conditions after the outcome proved unfavorable.

It held that licensees have no fundamental or vested right to renewal under Section 37 of the Rajasthan Excise Act.

The Court concluded that it cannot substitute its wisdom for executive policy in fiscal and regulatory matters.

All writ petitions were dismissed, and the cancellation of renewal applications and subsequent auction proceedings were upheld.