State may link liquor license renewal to district-wide participation thresholds and cluster-based settlement mechanisms without violating Article 14.

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.

The State introduced a "cluster" system where shops (1 to 5) were grouped together for settlement.

Under the policy, renewal of an individual license was made contingent upon: (a) at least 70% of eligible licensees in the district applying for renewal, and (b) all shops within a specific cluster opting for renewal.

If these conditions failed, the shops were liquidated via e-auction.

The petitioners, despite submitting valid renewal applications and fees, faced cancellation because other shops in their respective clusters remained unrenewed or the district threshold was not met.

They alleged these clauses were arbitrary and coercive.

The Court applied the principle that there is no fundamental right to trade in liquor, as it is res extra commercium, and the State holds "exclusive privilege" over its trade.

Relying on Khoday Distilleries Ltd. v. State of Karnataka [(1995) 1 SCC 574], the Court noted that while the State has a monopoly, its actions must not be "manifestly arbitrary" under Article 14.

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 also invoked the doctrine of estoppel, noting that petitioners who participate in a process after accepting policy terms cannot later challenge those terms upon an unfavorable outcome.

The Court reasoned that the formulation of excise policy falls within the domain of executive wisdom and fiscal strategy.

It held that the 70% district-wide threshold and the cluster-based renewal system were rational mechanisms intended to ensure revenue stability, prevent "fallow" unregulated areas, and optimize administrative efficiency.

The Court rejected the argument of "economic coercion," stating that the State is entitled to adopt collective mechanisms to secure revenue and that the policy applied uniformly to all districts and licensees.

Furthermore, the Court found no evidence of mala fides or "hostile discrimination," noting that the petitioners had signed undertakings acknowledging these policy conditions when they initially applied for renewal.

Since the regulation of liquor is a State privilege under Entry 8 and 51 of List II, the Court's scope of judicial review is limited to testing constitutional boundaries rather than substituting policy wisdom.

The Court affirmed that there is no fundamental right to the renewal of a liquor license and that the State acted within its regulatory privilege.

The Court concluded that the petitioners had failed to demonstrate any manifest arbitrariness or constitutional infirmity that would warrant judicial interference in an executive policy matter.

All interim reliefs were vacated, and the State was permitted to proceed with the cluster-wise e-auctions.