State may make liquor license renewal conditional upon cluster-wide participation and district-level percentage thresholds.

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.

The new policy introduced a "cluster" system (grouping 1–5 shops) and mandated that renewal of licenses in a district would only occur if 70% of eligible licensees applied for renewal.

If the 70% threshold was not met, or if any shop within a cluster remained unrenewed, the entire cluster/district would be subject to e-auction.

The petitioners’ renewal applications were cancelled because certain shops within their respective clusters remained unrenewed, leading the Department to propose auctions for those clusters.

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

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 despite the res extra commercium doctrine.

The Court primarily applied the principle that trade in intoxicating liquor is res extra commercium, meaning no citizen has a fundamental right under Article 19(1)(g) to carry on such business.

It relied on the landmark precedent Khoday Distilleries Ltd. v. State of Karnataka, establishing that the State holds "exclusive privilege" over liquor and can create a monopoly or impose restrictive limitations.

However, the Court noted that State action must still satisfy the test of Article 14 (non-arbitrariness).

Further, Section 37 of the Rajasthan Excise Act, 1950 was applied, which stipulates that no person has a claim to renewal of a license as a matter of right.

The Court reasoned that since liquor trade is a privilege and not a right, the State possesses wide latitude in framing policies for revenue optimization and regulation.

The 70% renewal threshold and cluster-based auctions were found to be rational policy tools intended to prevent "fallow" (unserved) areas and ensure administrative stability; thus, they did not constitute "manifest arbitrariness."

The Court rejected the argument of "economic coercion," holding that renewal is voluntary and subject to the State's declared conditions.

Furthermore, the petitioners were held to be estopped from challenging the policy because they had participated in the renewal process and signed undertakings accepting the policy terms before their applications were ultimately rejected.

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

The Court answered that there is no fundamental or vested right to the renewal of a liquor license, and the State’s cluster-based auction mechanism is a valid exercise of its regulatory power.

The prayers to quash the policy clauses and the cancellation notices were denied.