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

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 petitioners’ renewal applications were rejected because certain shops within their assigned clusters remained unrenewed, leading the Department to slate the entire clusters for e-auction.

The petitioners alleged these clauses were arbitrary, created "economic coercion," and made their individual rights contingent on the actions of third parties.

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

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

3. Whether the State's exercise of its "exclusive privilege" in liquor trade is subject to judicial review despite the res extra commercium doctrine.

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

It relied on Khoday Distilleries Ltd. v. State of Karnataka (1995), which clarifies that while the State holds "exclusive privilege" over intoxicating liquors, its regulatory methods must still satisfy the non-arbitrariness test of Article 14.

The Court 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 principle of Estoppel, noting that petitioners who participated in the process accepted the policy terms.

The Court reasoned that the 70% district-wide threshold and the cluster-based renewal system are matters of executive policy aimed at revenue optimization, administrative efficiency, and preventing "fallow" areas where illegal trade might thrive.

It held that linking an individual's renewal to group participation is a valid regulatory mechanism to ensure "collective stability" and is not "manifestly arbitrary."

The Court emphasized that judicial review of excise policy is narrow; it cannot substitute its wisdom for the State’s fiscal strategy unless a clear constitutional breach is proven.

Since the Policy applied uniformly across the state and the petitioners had signed undertakings agreeing to these conditions, their challenge was deemed a request for "judicial substitution" of policy.

The Court answered that: (1) no fundamental or vested right to renewal exists under Section 37 of the Excise Act.

(2) the cluster and threshold requirements are rational policy tools for revenue protection and do not constitute hostile discrimination.

(3) the petitioners, having sought renewal under the policy, were estopped from challenging its unfavorable conditions.

All interim reliefs were vacated.