State may make liquor license renewal conditional upon district-wide and cluster-based participation 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 Rajasthan Excise & Temperance Policy 2025–2029.

The new policy introduced a "cluster" system (grouping 1–5 shops) and set a district-wide renewal threshold.

Under the impugned clauses, renewal was denied to compliant individuals if: (a) less than 70% of eligible licensees in the district applied for renewal; or (b) any single shop within their assigned cluster remained unrenewed.

The petitioners, despite submitting timely applications and fees, saw their renewals cancelled because either their district failed the 70% mark or a shop in their cluster was unlifted.

They alleged these conditions were arbitrary and amounted to economic coercion.

1. Whether the State’s power to regulate liquor trade as an "exclusive privilege" is subject to judicial review under Article 14 of the Constitution.

2. Whether Clauses 2.2.6, 2.2.7, and 2.2.8 of the Excise Policy 2025–2029 are factorially arbitrary or discriminatory by making an individual's renewal contingent on the conduct of third parties.

3. Whether an existing licensee possesses a vested right to the renewal of a liquor license under the Rajasthan Excise Act, 1950.

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 the landmark precedent Khoday Distilleries Ltd. v. State of Karnataka, holding that the State may create a monopoly or place any restrictions on liquor trade, provided the method is not "manifestly arbitrary" under Article 14.

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

The principle of "Estoppel" was also applied, noting that petitioners who participated in the process after signing undertakings to abide by the policy cannot challenge it after an unfavorable outcome.

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

The 70% threshold and cluster mechanism were viewed as rational administrative tools to prevent "fallow areas" (unserved locations) and ensure revenue stability across a district rather than just in high-profit pockets.

The Court rejected the argument of "individual hardship," stating that in regulatory matters, the State is entitled to use collective benchmarks.

It found that the policy operated uniformly across the state, thereby satisfying the test of "intelligible differentia."

Furthermore, the Court noted that judicial review cannot be used to substitute the judiciary’s opinion for executive wisdom on economic policy or the viability of "clusters."

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

(2) the clustering and 70% threshold are valid policy decisions aimed at preventing illegal trade and maximizing revenue.

(3) the petitioners were estopped from challenging the terms they had previously accepted in their renewal applications.

All interim stays were vacated.