If the incorporation document is the birth certificate of a limited liability partnership, the LLP agreement is its living constitution. Section 23 of the Limited Liability Partnership Act, 2008 is the hinge on which the entire internal governance of an LLP turns: it makes the agreement the primary source of the mutual rights and duties of partners, requires that agreement to be filed with the Registrar, validates pre-incorporation pacts once ratified, and supplies a statutory fallback through the First Schedule where the partners have stayed silent. For judiciary and CLAT-PG aspirants, Section 23 is where the contractual freedom of partnership law meets the disciplined, document-driven architecture of a body corporate. This chapter unpacks all four sub-sections, the First Schedule defaults they invoke, the filing machinery under the LLP Rules, and the recent Kartik Radia ruling that has turned the First Schedule into a source of statutory arbitration.
Where Section 23 sits in the scheme of the Act
The Limited Liability Partnership Act, 2008 grafts the limited-liability shield of a company onto the contractual flexibility of a partnership. Chapters II and III deal with incorporation and the consequences of becoming a body corporate with perpetual succession; Chapter IV, headed "Partners and their Relations", opens with Section 22 (eligibility to be a partner) and immediately moves to Section 23, titled Relationship of partners. The placement is deliberate. Once two or more persons have subscribed to the incorporation document and the Registrar has issued the certificate under Section 12, the law must answer a basic question: by what rules do these partners deal with one another and with the LLP itself? Section 23 answers that the rules are, first and foremost, whatever the partners have agreed.
This makes Section 23 the gateway to the internal constitution of the LLP. It interlocks with the definitions in Section 2 — particularly the meaning of "LLP agreement" and "partner" — covered in our note on definitions: LLP and designated partner, and it feeds directly into the mutual rights and duties of partners. A candidate who understands Section 23 holds the master key to the LLP's governance; the rest of Chapter IV is largely elaboration. For the broader statutory map, see the LLP Act notes hub.
What is an "LLP agreement"? The Section 2(1)(o) definition
Section 23 cannot be read in isolation from the definition it borrows. Section 2(1)(o) defines "limited liability partnership agreement" to mean any written agreement between the partners of the LLP, or between the LLP and its partners, which determines the mutual rights and duties of the partners and their rights and duties in relation to that LLP. Two features stand out. First, the agreement must be written — unlike a partnership under the Indian Partnership Act, 1932, which may rest on an oral understanding or be inferred from conduct, the LLP agreement is a documentary instrument. Second, the definition expressly contemplates two relationships: partner-to-partner, and LLP-to-partner. The LLP, a juristic person distinct from its members, is itself a party to the bargain.
This dual character matters enormously in litigation. In Kartik Radia v. BDO India LLP (2025 SCC OnLine Bom 445), the Bombay High Court relied on the Section 2(1)(o) definition to hold that an LLP "is not a third party to its own LLP agreement"; the running of the LLP is the very subject-matter of that agreement, just as a company is not a stranger to its own articles of association. Coupled with Section 2(1)(q), which defines a "partner" as a person who becomes a partner "in accordance with the limited liability partnership agreement", the statute makes the agreement the constitutive document of membership itself — entry, exit and rights all flow from it.
Section 23(1): the agreement governs, save as otherwise provided
Section 23(1) provides that, save as otherwise provided by this Act, the mutual rights and duties of the partners of an LLP, and the mutual rights and duties of an LLP and its partners, shall be governed by the LLP agreement between the partners, or between the LLP and its partners. The opening words "save as otherwise provided by this Act" are the crucial qualifier. The agreement is supreme on matters of internal relationship, but it cannot override the mandatory provisions of the Act — for example, the liability of an LLP for the wrongful acts of a partner under Section 27, the limited-liability protection of partners under Section 28, or the statutory duties of designated partners under Sections 8 and 9. Partners enjoy freedom of contract within the four corners of the statute, not above it.
The sub-section reflects the hybrid philosophy of the Act. On internal governance — profit-sharing, management, admission and retirement of partners, remuneration, decision-making thresholds — the partners are masters of their own bargain. But on matters affecting third parties and the public character of the LLP as a body corporate, the Act prevails. This is why a well-drafted LLP agreement is indispensable in practice: in its absence, the partners are thrown back on the default First Schedule, which may not reflect their commercial intent at all. The contractual primacy in Section 23(1) is therefore both an empowerment and a warning.
Section 23(2): filing the agreement and changes with the Registrar
Section 23(2) requires that the LLP agreement, and any changes made therein, be filed with the Registrar in such form, manner and accompanied by such fees as may be prescribed. The prescription is found in Rule 21 of the Limited Liability Partnership Rules, 2009, which mandates filing in Form 3 within thirty days of incorporation, and any subsequent change again in Form 3 within thirty days of the change. This filing requirement is what distinguishes the LLP regime from an ordinary partnership: the internal constitution is placed on a public register at the Ministry of Corporate Affairs, lending the document a quasi-public character even though it primarily governs private relations.
A recurring examination point is the consequence of non-filing. The Act prescribes no provision invalidating an unfiled agreement inter se the partners; an executed and validly stamped agreement binds the partners by ordinary principles of contract regardless of registration. What non-filing attracts is the additional-fee/penalty machinery and, practically, the Registrar's refusal to take changes on record. Stamp duty is a separate but linked compliance: as the Act is silent and stamp duty is a State subject, the LLP agreement is stamped under the relevant State Stamp Act (commonly at the rate applicable to partnership deeds), and the Registrar will object to registration of an inadequately stamped instrument. Filing under Section 23(2) is thus best understood as a compliance and notice obligation layered on top of, not a precondition to, the contractual validity of the agreement.
Section 23(3): pre-incorporation agreements and ratification
Section 23(3) addresses a problem inherent in any body corporate: a company or LLP cannot contract before it exists, yet promoters routinely make commitments in its name during formation. The sub-section provides that an agreement in writing made before the incorporation of an LLP, between the persons who subscribe their names to the incorporation document, may impose obligations on the LLP — provided such agreement is ratified by all the partners after incorporation. This is the LLP statute's bespoke answer to the common-law difficulty of pre-incorporation contracts, familiar from company law in cases such as Kelner v. Baxter (1866) LR 2 CP 174 and addressed in India through Sections 15(h) and 19(e) of the Specific Relief Act, 1963.
Two conditions are cumulative. The pre-incorporation agreement must be in writing, and it must be ratified by all the partners after the LLP comes into being — not a majority, but every partner. Once ratified, the obligation binds the LLP as if it had been a party from the outset. Rule 21(2) of the LLP Rules requires that such ratification be intimated to the Registrar in Form 3 within thirty days of incorporation, dovetailing with the filing regime in Section 23(2). The mechanism allows promoters to negotiate leases, vendor contracts and funding arrangements during the gestation of the LLP, secure in the knowledge that the entity can adopt them upon birth, while protecting incoming partners through the unanimity requirement. This procedure links closely to the incorporation of an LLP procedure.
Section 23(4): the First Schedule as statutory fallback
Section 23(4) is the safety net. It provides that in the absence of agreement as to any matter, the mutual rights and duties of the partners, and of the LLP and its partners, shall be determined by the provisions relating to that matter as set out in the First Schedule. The phrase "as to any matter" is significant: the fallback operates issue-by-issue. If the LLP agreement is silent on, say, remuneration but speaks on profit-sharing, the First Schedule fills only the gap on remuneration while the agreement governs profit-sharing. Where there is no agreement at all, the entire First Schedule supplies the constitution by default.
This gap-filling design mirrors the structure of the Indian Partnership Act, 1932, where Sections 12 to 17 supply default rules subject to contrary agreement. The drafting policy is the same: respect party autonomy, but never leave a relationship without rules. For aspirants, the examinable point is the relationship between sub-sections (1) and (4): Section 23(1) makes the agreement supreme, and Section 23(4) ensures that silence in the agreement is never fatal because the First Schedule speaks where the partners have not. The two sub-sections together form a complete contractual code for internal LLP governance.
The First Schedule default rules, clause by clause
The First Schedule contains the substantive defaults that Section 23(4) invokes. The principal clauses, frequently tested, are these. Equal sharing: all partners are entitled to share equally in the capital, profits and losses of the LLP, irrespective of the actual capital each contributed — a default that often surprises partners who assumed sharing would track contribution. Indemnity: the LLP must indemnify each partner for payments made and personal liabilities incurred in the ordinary and proper conduct of the business, or in anything necessarily done to preserve the LLP's business or property. Participation in management: every partner may take part in the management of the LLP. No remuneration: no partner is entitled to remuneration for acting in the business or management of the LLP — again, a default the agreement usually displaces.
Further defaults: introduction of a new partner requires the consent of all existing partners; ordinary matters are decided by a majority of the partners, each partner having one vote, but no change in the nature of the business may be made without the consent of all partners; minutes of decisions must be recorded within thirty days and kept at the registered office; every partner must render true accounts and full information of all things affecting the LLP to any partner; a partner must account for private profits derived without consent from any transaction concerning the LLP or from use of its property, name or business connection; a partner carrying on a competing business without consent must account for and pay over all profits made; and crucially, no majority of partners can expel any partner unless a power to do so has been conferred by express agreement. The final default — a mandatory reference of disputes to arbitration — is examined separately below.
Arbitration under the First Schedule and the Kartik Radia ruling
The last clause of the First Schedule provides that all disputes between the partners arising out of the LLP agreement which cannot be resolved in terms of the agreement shall be referred to and determined by arbitration in accordance with the Arbitration and Conciliation Act, 1996. Read with Section 23(4), this creates a remarkable result: where the LLP agreement contains no arbitration clause, the statute itself supplies one. This was the fulcrum of Kartik Radia v. BDO India LLP (2025 SCC OnLine Bom 445), a Section 11 petition decided by Justice Somasekhar Sundaresan of the Bombay High Court in March 2025.
The applicant, an expelled partner, sought appointment of an arbitrator against both the managing partner and the LLP itself. The LLP resisted on the ground that it had not signed the LLP agreement and was therefore a non-signatory outside the arbitration agreement. The Court rejected the argument. Drawing on the Section 2(1)(o) definition, it held that the LLP is not a stranger to its own constitutional document — "the running of the LLP is the very subject matter of the LLP agreement" — and that Section 23(4) read with the First Schedule supplies a statutory arbitration agreement binding the LLP. The Court invoked the reasoning of the Constitution Bench in Cox and Kings Ltd. v. SAP India Pvt. Ltd. (2024) 4 SCC 1, which recognised that a non-signatory may be bound where the common intention and the subject-matter so demand. The upshot: even a non-signatory LLP can be dragged into arbitration over its own governance. This is the leading modern authority on Section 23 and a near-certain examination topic.
LLP agreement compared with a company's articles of association
A favourite comparative question pits the LLP agreement against a company's memorandum and articles. The analogy is close but not exact. Both are constitutional documents of a body corporate, both are filed on a public register, and both govern internal management. The Bombay High Court in Kartik Radia expressly drew the parallel, observing that arguing the LLP is a third party to its agreement is like arguing a company is a third party to its own articles of association — an analytical link traceable to the contractual force of articles recognised in Naresh Chandra Sanyal v. Calcutta Stock Exchange (1971) 1 SCC 50 and, classically, Wood v. Odessa Waterworks Co. (1889) 42 Ch D 636.
But there are differences. A company's articles are a statutory contract under Section 10 of the Companies Act, 2013, binding the company and members as if signed by each; the LLP agreement is an ordinary written contract whose binding force flows from Section 23(1) and general contract law, not from a deemed-signature fiction. The LLP agreement is also far more flexible in form, capable of distributing profits, management and voting rights in any manner the partners choose, with the First Schedule filling only the gaps. The LLP thus sits between a traditional partnership and a company — contractual at its core, corporate in its shell — a theme developed in our note on the nature of an LLP as a body corporate.
Amending the agreement and the supplementary deed
An LLP agreement is not frozen at incorporation. Partners may amend it — to change profit ratios, admit or retire partners, alter capital contribution, modify designated-partner arrangements, or change the registered office or business activity. Every such change is given effect through a supplementary LLP agreement (or supplementary deed), and Section 23(2) read with Rule 21 of the LLP Rules requires the change to be filed with the Registrar in Form 3 within thirty days. The supplementary deed must itself be adequately stamped under the relevant State Stamp Act, and where it records additional capital contribution it may attract ad valorem stamp duty in some States.
The mechanics of amendment must respect the agreement's own clauses on decision-making. If the agreement is silent on the threshold for amendment, the First Schedule defaults apply — ordinary matters by majority, but a change in the nature of business requiring unanimity, and admission of a new partner requiring the consent of all. A frequent practical and examination trap is the assumption that a simple majority can always amend the agreement; where the change touches a matter the First Schedule reserves for unanimity, majority consent will not suffice unless the agreement expressly provides otherwise. Drafting an explicit amendment clause is therefore standard professional practice.
Consequences of having no LLP agreement at all
It is entirely possible — if imprudent — for an LLP to exist with no written agreement, since Section 12 issues the certificate of incorporation on the basis of the incorporation document and Form 2, not the LLP agreement. Where the partners never execute an agreement, Section 23(4) ensures the LLP is not lawless: the entire First Schedule governs by default. The result is equal profit-sharing regardless of capital, no remuneration for any partner, decision-making by majority on ordinary matters with unanimity for fundamental changes, and — as Kartik Radia confirms — a statutory arbitration agreement covering disputes among partners and the LLP.
For most commercial ventures these defaults are unsatisfactory. Equal profit-sharing ignores unequal investment; the no-remuneration rule penalises working partners; and the unanimity requirement for admitting partners can paralyse a growing firm. This is why the First Schedule operates as a cautionary backstop rather than a desirable destination. The examination point is precise: an LLP can validly function without an agreement, but the moment a dispute arises the First Schedule — not the partners' unexpressed expectations — supplies the answer. The lesson for both practice and the exam is that Section 23 rewards those who draft, and disciplines those who do not.
Exam strategy: how Section 23 is tested
For prelims, expect crisp factual MCQs: the form for filing the agreement (Form 3), the time limit (thirty days), the schedule supplying defaults (First Schedule), the consent required to admit a new partner (all partners), and whether default partners are entitled to remuneration (no). For mains, the recurring essay and problem questions ask candidates to (i) explain the scheme of Section 23 across all four sub-sections; (ii) discuss the legal effect of non-filing and of the absence of an agreement; and (iii) analyse the validity of pre-incorporation agreements under Section 23(3) against the common-law backdrop of Kelner v. Baxter.
The highest-value modern authority is Kartik Radia v. BDO India LLP read with Cox and Kings Ltd. v. SAP India Pvt. Ltd. on statutory arbitration binding a non-signatory LLP — cite it whenever the question touches dispute resolution or the LLP's status as a party to its own agreement. Tie Section 23 back to the definitions in Section 2(1)(o) and (q), and contrast the LLP agreement with a company's articles to show analytical range. Candidates who can move fluidly between the bare text, the First Schedule defaults, and the case law will score well. Reinforce the foundations with our notes on the introduction to the LLP Act and the mutual rights and duties of partners.
Frequently asked questions
Is a written LLP agreement mandatory under the LLP Act, 2008?
No. An LLP can be incorporated and validly function without a written agreement, because the certificate of incorporation under Section 12 is issued on the incorporation document, not the agreement. However, in the absence of an agreement, Section 23(4) makes the entire First Schedule govern the partners' mutual rights and duties by default — equal profit-sharing, no remuneration, and unanimity to admit new partners. A written agreement is therefore strongly advisable even though it is not a precondition to incorporation.
What happens if the LLP agreement is not filed with the Registrar?
Section 23(2) and Rule 21 of the LLP Rules, 2009 require filing in Form 3 within thirty days. The Act does not declare an unfiled agreement void inter se the partners — a validly executed and stamped agreement binds them by ordinary contract law. Non-filing attracts additional fees and the Registrar's refusal to record changes, so the obligation is best seen as a compliance and notice requirement rather than a condition of contractual validity.
Can an agreement made before the LLP is incorporated bind the LLP?
Yes, under Section 23(3), but only on two cumulative conditions: the pre-incorporation agreement must be in writing between the persons who subscribe to the incorporation document, and it must be ratified by all the partners after incorporation. Once ratified — and intimated to the Registrar in Form 3 within thirty days — it imposes obligations on the LLP as if it had been a party from the start. This is the LLP statute's solution to the common-law problem of pre-incorporation contracts seen in Kelner v. Baxter.
Are partners entitled to share profits in proportion to their capital by default?
No. Under the First Schedule (invoked by Section 23(4)), all partners are entitled to share equally in the capital, profits and losses of the LLP, regardless of how much capital each actually contributed. This default frequently surprises partners and is a common examination point. To link profit-sharing to contribution, the partners must say so expressly in the LLP agreement, which Section 23(1) makes supreme on such internal matters.
Can an LLP be forced into arbitration even if it did not sign the LLP agreement?
Yes. In Kartik Radia v. BDO India LLP (2025 SCC OnLine Bom 445), the Bombay High Court held that an LLP is not a third party to its own agreement — the running of the LLP is its very subject-matter — and that Section 23(4) read with the First Schedule supplies a statutory arbitration agreement binding the LLP. Applying the Constitution Bench ruling in Cox and Kings Ltd. v. SAP India Pvt. Ltd. (2024) 4 SCC 1, the Court appointed an arbitrator over the LLP's non-signatory objection.
How is the LLP agreement amended, and what compliance follows?
Amendments are made through a supplementary LLP agreement (supplementary deed) and must be filed with the Registrar in Form 3 within thirty days under Section 23(2) and Rule 21. The amendment must follow the decision-making thresholds in the agreement; where the agreement is silent, the First Schedule applies — majority for ordinary matters but unanimity for a change in the nature of business or admission of a new partner. The supplementary deed must also be adequately stamped under the relevant State Stamp Act.