State may link liquor license renewal to district-wide 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.

The new policy introduced a "cluster" system where shops (1 to 5) are grouped together.

Under the impugned clauses, renewal of an individual license was made conditional 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.

The petitioners’ renewal applications were rejected or cancelled because either the district threshold was not met or other shops within their assigned clusters remained unrenewed, leading the Department to put the clusters up for 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 of India.

2. Whether an existing licensee has a fundamental or vested 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 on the grounds of reasonableness.

The court 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 judgment in Khoday Distilleries Ltd. v. State of Karnataka [(1995) 1 SCC 574], which established that the State holds "exclusive privilege" over intoxicants.

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

While acknowledging that State action must not be "manifestly arbitrary" under Article 14, the court emphasized the "Doctrine of Executive Wisdom" in matters of economic and fiscal policy.

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

It found that the 70% district-wide threshold and the cluster-based renewal system were rational policy tools intended to ensure stability and administrative uniformity.

The Court rejected the argument of "economic coercion," noting that renewal is voluntary and subject to predefined policy conditions which the petitioners accepted upon application.

The Court further noted that a policy is not arbitrary simply because an individual’s renewal is contingent upon collective participation (cluster/district levels), as the State is entitled to prioritize revenue security over individual commercial interests in the excise sector.

Finally, the court observed that the petitioners were estopped from challenging the policy after having participated in the process with full knowledge of its terms.

The impugned clauses of the Excise Policy 2025-2029 are neither arbitrary nor discriminatory as they apply uniformly across the State.

Licensees have no fundamental or vested right to renewal under Section 37 of the Rajasthan Excise Act.

The Court cannot substitute its own wisdom for that of the executive in matters of fiscal and regulatory strategy.

All pending applications were disposed of accordingly.