State's excise policy clustering liquor shops and conditioning renewal on collective district-wise thresholds is not arbitrary.

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.

Under this new policy, the State introduced a "cluster" system (grouping 1–5 shops) and made the renewal of existing licenses conditional upon: (i) at least 70% of eligible licensees in a district applying for renewal, and (ii) all shops within a specific cluster opting for renewal.

The petitioner’s renewal application was cancelled because one shop in her assigned cluster remained unrenewed, leading the Department to propose an auction for the entire cluster.

The petitioners alleged these clauses were arbitrary, created economic coercion, and made an individual's right contingent on the actions of third parties.

Whether Clauses 2.2.6, 2.2.7, and 2.2.8 of the Excise & Temperance Policy 2025–2029 are backbone-arbitrary or violative of Article 14 of the Constitution.

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

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 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) 1 SCC 574], which affirms the State’s exclusive privilege to manufacture and sell liquor and its power to create a monopoly.

The Court 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.

While acknowledging that State action must meet the test of Article 14 (non-arbitrariness), the Court emphasized the principle of judicial restraint in matters of executive economic policy.

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

It found the 70% district-wide threshold and the cluster-based renewal system to be rational mechanisms intended to prevent the "cherry-picking" of profitable shops while leaving non-viable areas unsettled, which often leads to illegal trade.

The Court rejected the argument of "economic coercion," noting that renewal is a voluntary choice subject to the policy's terms.

Furthermore, the court observed that the petitioners had accepted these conditions in their renewal applications, invoking a form of estoppel.

The grouping of shops into clusters was deemed an administrative exercise within the expertise of the Excise Commissioner, and in the absence of proven mala fides, the court declined to substitute its wisdom for that of the executive.

The court answered that there is no fundamental or vested right to the renewal of a liquor license.

It concluded that the cluster mechanism and the 70% threshold are valid policy tools for revenue stability and operate uniformly across the State.

Interference was refused as no manifest constitutional infirmity was demonstrated.

All pending applications were disposed of accordingly.