### State’s exclusive privilege to regulate liquor trade through cluster-based renewal policies is constitutionally valid.

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 where shops (1 to 5) were grouped together.

Renewal of an individual license was made contingent 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, despite fulfilling individual eligibility and paying fees, had their renewal applications cancelled because either the district failed the 70% threshold or fellow cluster members did not apply, leading to the clusters being put to e-auction.

1. Whether Clauses 2.2.6, 2.2.7, and 2.2.8 of the Excise Policy 2025-2029 are arbitrary, discriminatory, and violative of Article 14 of the Constitution by making an individual's renewal dependent on the conduct of third parties.

2. Whether the State’s exercise of its "exclusive privilege" in liquor trade is subject to judicial review on the grounds of reasonableness and fairness.

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

The Court primarily applied Article 14 (Right to Equality) and Article 47 (Directive Principle to bring about prohibition) of the Constitution.

It relied on the landmark precedent in *Khoday Distilleries Ltd. v. State of Karnataka*, which established that a citizen has no fundamental right to trade in liquor (it being res extra commercium) and the State holds "exclusive privilege" over its regulation.

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

The Court reasoned that while liquor trade is a regulated privilege and not a fundamental right under Article 19(1)(g), State actions must still avoid "manifest arbitrariness" to satisfy Article 14.

However, the Court found that the 70% district threshold and cluster-based renewals were rational policy tools designed to ensure revenue stability, administrative efficiency, and to prevent "fallow areas" where illegal trade might thrive if only profitable shops were renewed.

The Court observed that the policy applied uniformly across the State and was accepted by an overwhelming majority (6,420 out of 7,665 licensees).

Furthermore, the Court noted that the petitioners had signed undertakings agreeing to these terms when applying, thus estopping them from challenging the policy after an unfavorable outcome.

The Court emphasized that it cannot substitute "executive wisdom" with its own views on economic or fiscal policy.

It affirmed that there is no fundamental or vested right to the renewal of a liquor license.

The Court held that the cluster mechanism is a valid exercise of State privilege aimed at revenue optimization.

Consequently, the bench dismissed the entire batch of writ petitions and upheld the cancellation of the petitioners' renewal applications and the subsequent auction proceedings.