State's exclusive privilege in liquor trade permits cluster-based renewal thresholds subject to Article 14 scrutiny.

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 made the renewal of individual licenses conditional upon: (a) at least 70% of eligible licensees in a district applying for renewal, and (b) all shops within a specific cluster opting for renewal.

The petitioners’ renewal applications were rejected or cancelled because either the district-wide 70% threshold was not met or other shops within their assigned clusters remained unrenewed, leading the State to put the entire clusters up for e-auction.

The petitioners argued these clauses were arbitrary and coercive.

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

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

The Court applied the principle that trade in liquor is res extra commercium, meaning no citizen has a fundamental right under Article 19(1)(g) to do business in intoxicants; it is an "exclusive privilege" of the State.

Reliance was placed on Khoday Distilleries Ltd. v. State of Karnataka (1995), which established that the State can create a monopoly and impose restrictions different from those on ordinary trade.

Section 37 of the Rajasthan Excise Act, 1950 was invoked to clarify that no person has a claim to the renewal of a license as a matter of right.

The Court also applied the doctrine of limited judicial review in policy matters, holding that executive wisdom in fiscal/revenue subjects should not be disturbed unless "manifestly arbitrary."

The Court reasoned that since liquor trade is a privilege and not a right, the State possesses wide discretion to determine the method of settlement to optimize revenue and prevent illegal trade in "fallow" (unserved) areas.

It held that the 70% district threshold and cluster-based renewal requirements were rational policy tools intended to ensure administrative uniformity and substantial participation.

The Court rejected the plea of "economic coercion," noting that renewal is voluntary and subject to declared policy conditions.

Critically, the Court observed that the petitioners had submitted applications with full knowledge of these clauses and signed undertakings, thereby attracting the principle of estoppel—they could not challenge the policy only after failing to secure a benefit under it.

The grouping of shops into clusters was deemed an administrative exercise for revenue stabilization, which does not inherently violate Article 14.

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

The State’s cluster mechanism was found to be a legitimate exercise of executive policy-making aimed at revenue optimization and was neither arbitrary nor discriminatory.

Consequently, the cancellation of the petitioners' renewal applications and the subsequent auction proceedings were upheld.