### State’s Privilege to Impose Cluster-Based Liquor License Renewal Thresholds Is Constitutionally Valid under Article 14

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 were grouped (1 to 5 shops) for settlement.

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

The petitioner’s renewal application was rejected because one shop in her assigned cluster remained unrenewed, leadings to the cluster being put up for e-auction.

The petitioners argued these conditions were arbitrary, coercive, and violated Article 14 by making their rights dependent on the choices of third parties.

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.

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

3. Whether the State’s exercise of "exclusive privilege" in liquor trade is subject to judicial review on the grounds of fairness and non-arbitrariness.

The Court primarily applied the principle that there is no fundamental right to trade in liquor under Article 19(1)(g), as potable liquor is res extra commercium.

It relied on the landmark precedent Khoday Distilleries Ltd. v. State of Karnataka (1995), establishing that the State holds "exclusive privilege" over intoxicants and can create a monopoly or impose restrictions different from ordinary trades.

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

Furthermore, it applied the doctrine of "limited judicial review" regarding executive policy decisions, holding that Courts should not substitute their wisdom for that of the executive in fiscal or revenue matters unless there is manifest arbitrariness.

The Court reasoned that since liquor trade is a privilege and not a right, the State has wide latitude to determine the method of settlement to maximize revenue and prevent illegal trade in "fallow" areas.

It found that the 70% district-wide threshold and the cluster-total-renewal requirement were rational policy tools intended to ensure administrative stability and uniform settlement.

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

It further noted that the petitioners had signed undertakings accepting these policy conditions when applying for renewal, thus estopping them from challenging the criteria after failing to secure the benefit.

The cluster formation was held to be an administrative exercise within the Excise Commissioner's competence, and no evidence of hostile discrimination was found.

It held that petitioners have no fundamental or vested right to renewal under the Rajasthan Excise Act or the Constitution.

The High Court dismissed the entire batch of writ petitions, affirming the State's power to implement the cluster-based renewal system under the 2025–2029 Policy.

No relief was granted to the petitioners, and the cancellation of their renewal applications was upheld.