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

Under this new policy, the State introduced a "cluster" system where shops (1 to 5) were grouped together.

Renewal of an individual license was made contingent 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.

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

The petitioners’ renewal applications were cancelled because their respective clusters or districts failed to meet these collective thresholds, leading the State to propose a fresh auction.

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 [(1995) 1 SCC 574], which clarifies that the State holds "exclusive privilege" over intoxicating liquors and can create a monopoly or impose restrictive regulations.

The Court also applied Section 37 of the Rajasthan Excise Act, 1950, which stipulates that no person has a vested claim to the renewal of a license.

Finally, it applied the principle of "Limited Judicial Review" in policy matters, asserting that courts should not substitute executive wisdom with judicial opinion unless the policy is patently arbitrary or lacks a rational nexus to its object.

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

Regarding Clause 2.2.6 and 2.2.7, the Court found that the 70% threshold was a uniform policy benchmark intended to ensure administrative stability; linking individual renewals to district-level participation was a valid regulatory choice.

The "cluster" approach was viewed as a rational tool to prevent "fallow areas" by ensuring that less profitable shops are settled alongside lucrative ones, thereby preventing unregulated liquor sales in unserved regions.

The Court further noted that the petitioners had submitted their applications with full knowledge of these conditions, thereby attracting the principle of estoppel.

No evidence of mala fides or "hostile discrimination" was found, as the policy applied equally to all licensees statewide.

The Court answered the issues by stating: (1) there is no fundamental or vested right to liquor trade or license renewal.

(2) the cluster and threshold mechanisms are valid exercises of executive policy aimed at revenue stability and contain a rational nexus to the State's objectives.

Consequently, the Court declined to quash the auction notices or direct the renewal of the petitioners' licenses.

All stay applications and pending motions were disposed of accordingly.