State's excise policy clustering liquor shops and conditioning license renewal on district-wide participation thresholds is not arbitrary.

The petitioners, existing licensees of retail liquor shops 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 2025-2029 Policy introduced a "cluster" system where shops (1 to 5) are grouped contiguously.

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 applying for renewal.

If these conditions were not met, the shops were subject to cluster-wise e-auction.

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

1. Whether the State’s power to regulate liquor trade is subject to judicial review under Article 14 of the Constitution despite liquor being res extra commercium?

2. Whether Clauses 2.2.6, 2.2.7, and 2.2.8 of the Excise Policy 2025-2029 are arbitrary and discriminatory by making an individual’s renewal contingent upon the conduct of third parties (other licensees)?

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

The Court applied the principle that while the State holds "exclusive privilege" over intoxicating liquors under Entry 8 and 51 of List II, its actions must not be arbitrary or discriminatory under Article 14.

It relied on Khoday Distilleries Ltd. v. State of Karnataka (1995), establishing that there is no fundamental right to trade in liquor as it is res extra commercium.

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

The doctrine of "Executive Wisdom" in policy matters was also invoked, limiting judicial intervention to cases of manifest arbitrariness.

The Court reasoned that since liquor trade is a privilege and not a right, the State possesses wide latitude to frame policies for revenue optimization and administrative stability.

The 70% district threshold and cluster-based renewals were viewed as rational policy tools to ensure "substantial participation" and prevent "fallow or unregulated areas" which could lead to illegal trade.

The Court rejected the argument of "economic coercion," noting that renewal is voluntary and licensees had signed undertakings accepting the policy terms.

It held that linking individual renewals to cluster-wide participation does not constitute "hostile discrimination" because the rules apply uniformly to all districts and licensees.

The Court emphasized that it cannot sit in appeal over the economic merits or "wisdom" of an executive policy unless a clear constitutional transgression is shown, which was absent here.

It upheld the constitutional validity of Clauses 2.2.6, 2.2.7, and 2.2.8 of the Excise Policy 2025-2029, finding them neither arbitrary nor discriminatory.

The Court dismissed the batch of writ petitions, concluding that the cluster mechanism is a valid exercise of the State's regulatory power aimed at revenue stability.

No relief was granted to the petitioners regarding the cancellation of their renewal applications.