State may link liquor license renewal to district-level thresholds and cluster-based settlement under its exclusive privilege.

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 "clusters" (groups of 1–5 shops) and made the renewal of individual licenses conditional upon: (a) at least 70% of eligible licensees in a district applying for renewal, and (b) all shops within a specific cluster opting for renewal.

The petitioners’ renewal applications were cancelled or not considered because certain shops within their assigned clusters remained unrenewed, leading the Department to propose settling those clusters via e-auction.

1. Whether Clauses 2.2.6, 2.2.7, and 2.2.8 of the Excise Policy 2025-2029 are arbitrary, discriminatory, or violative of Article 14 of the Constitution by making an individual’s renewal dependent on the actions of third parties.

2. Whether the State’s exercise of its "exclusive privilege" in liquor trade is subject to judicial review despite the absence of a fundamental right to trade in intoxicants.

The Court applied Entry 8 and Entry 51 of List II, Seventh Schedule of the Constitution, granting the State plenary power to regulate and tax intoxicating liquors.

It relied on the "Res Extra Commercium" doctrine established in *Khoday Distilleries Ltd. v. State of Karnataka*, holding that citizens have no fundamental right under Article 19(1)(g) to trade in liquor.

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

While affirming that State action must meet the non-arbitrariness test of Article 14 (*Secretary to Govt. v. K. Vinayagamurthy*), the Court emphasized the principle of "Executive Wisdom" in fiscal and policy matters.

The Court reasoned that since liquor trade is a privilege and not a right, the State possesses wide latitude to frame policies for revenue optimization and administrative efficiency.

The "70% district threshold" and "cluster mechanism" were viewed as rational tools to prevent "fallow areas" (unserved locations) and ensure the settlement of less-profitable shops alongside high-potential ones.

The Court rejected the argument of "economic coercion," noting that renewal is a voluntary choice subject to declared policy conditions.

Regarding the petitioners' claim of arbitrariness, the Court found that the policy operated uniformly across the State.

Furthermore, the petitioners were held to be estopped from challenging the policy after having participated in the renewal process and signing undertakings to abide by its terms.

The Court held that it cannot substitute its own view for the executive’s policy wisdom in regulatory matters.

Consequently, the batch of writ petitions was dismissed, and the State's right to auction the clusters was upheld.