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 Excise and Temperance Policy 2025-2029.

Under this new policy, the State 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.

The petitioner in the lead case applied for renewal, but because her shop belonged to a cluster where one shop remained unrenewed, her application was cancelled, and the cluster was slated for e-auction.

The petitioners alleged these clauses were arbitrary, as they made an individual’s right to renewal contingent upon the actions of third parties and district-wide statistics.

1. Whether Clauses 2.2.6, 2.2.7, and 2.2.8 of the Excise and Temperance Policy 2025-2029 are factorially arbitrary or discriminatory, violating Article 14 of the Constitution.

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

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

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

It relied on the landmark precedent of Khoday Distilleries Ltd. v. State of Karnataka [(1995) 1 SCC 574], establishing that the State holds "exclusive privilege" over intoxicating liquors but must exercise this power without manifest arbitrariness to satisfy Article 14.

Statutorily, the Court applied Section 37 of the Rajasthan Excise Act, 1950, which explicitly states that no person has a vested claim to the renewal of a license.

The Court reasoned that since liquor trade is a regulated privilege rather than a right, the State possesses wide latitude in framing policies for revenue optimization and administrative efficiency.

The Court found that the 70% district-wide threshold and the cluster mechanism were rational policy choices aimed at preventing "fallow areas" (unregulated zones) and ensuring stable revenue collection.

It rejected the argument of "economic coercion," noting that renewal is voluntary and the policy applies uniformly to all districts, thus failing the test of hostile discrimination.

Furthermore, the Court observed that the petitioners had signed undertakings accepting the policy terms when applying for renewal, and were therefore estopped from challenging the conditions after failing to secure the benefit.

The Court emphasized that it cannot substitute "executive wisdom" with its own view on the economic merits of a cluster system.

It ruled that the petitioners have no fundamental or vested right to renewal under the Rajasthan Excise Act.

The High Court dismissed the entire batch of writ petitions, affirming the State's right to implement the cluster-based auction system as part of its regulatory privilege.

All interim reliefs were vacated.