State may link liquor license renewal to district-wide participation thresholds and cluster-based settlement.

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 a "cluster" system where 1 to 5 contiguous shops were grouped together.

Renewal of an individual license was made 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.

If a shop within a cluster remained unrenewed, existing licensees in that cluster were pressured to take it over, failing which the entire cluster was put to e-auction.

The petitioners, having fulfilled individual eligibility but faced with cancellation due to these collective conditions, alleged the policy was arbitrary and coercive.

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

2. Whether a licensee has a vested or fundamental right to the renewal of a liquor license under the Rajasthan Excise Act, 1950.

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 the landmark precedent Khoday Distilleries Ltd. v. State of Karnataka, establishing that the State holds "exclusive privilege" over intoxicating liquors and can create a monopoly or impose restrictive conditions on its trade.

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

Furthermore, it applied the doctrine of "Executive Wisdom," highlighting that policy decisions involving revenue and administration are generally beyond the scope of judicial review unless they suffer from "manifest arbitrariness."

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

Regarding the 70% district threshold and cluster requirements, the Court found these to be uniform regulatory benchmarks aimed at administrative stability rather than "hostile discrimination."

The Court rejected the plea of economic coercion, noting that participation in the renewal process is voluntary.

Crucially, the Court observed that the petitioners had signed undertakings and submitted applications with full knowledge of these policy terms; therefore, they were estopped from challenging the criteria after failing to secure renewal.

The Court concluded that the petitioners failed to demonstrate "manifest arbitrariness," and were essentially asking the judiciary to substitute its own opinion for the policy wisdom of the executive, which is impermissible.

It held that the impugned clauses of the Excise Policy 2025-2029 are constitutionally valid as they apply uniformly and serve legitimate State interests in revenue and regulation.

The High Court dismissed the entire batch of writ petitions, upholding the State’s right to cancel renewal applications and proceed with cluster-wise e-auctions.