Which of the following is NOT a way to redeem the debentures?

Which of the following is NOT a way to redeem the debentures?

Answer & explanation

Correct answer: option 4

The correct answer is Option (4) → Conversion into shares only NOT in new debentures

The book names four ways of redeeming debentures: payment in lump sum, payment in instalments, purchase in the open market, and conversion into shares or new debentures. Option (4) limits the fourth method to shares and shuts out new debentures, so it does not describe a way of redemption as the book states it.

Option (1) Payment in Instalments — A method of redemption. The debenture liability is paid off in parts on fixed dates, the debentures being chosen by drawing lots.
Option (2) Payment in Lumpsum — A method of redemption. The whole amount is paid to the debentureholders on maturity.
Option (3) Purchase in open Market — A method of redemption. The company buys its own debentures and cancels them.
Option (4) Conversion into shares only NOT in new debentures — Correct. Conversion may be into shares or into a new class of debentures; excluding new debentures misstates the method.

NCERT (2026-27 edition):
Redemption of Debentures – “… There are four ways by which the debentures can be redeemed. These are : 1. Payment in lump sum 2. Payment in instalments 3. Purchase in the open market 4. By conversion into shares or new debentures.”

NCERT (2026-27 edition):
Redemption of Debentures – “… Conversion into shares or new debentures : A company can redeem its debentures by converting them into shares or new class of debentures. If debentureholders find that the offer is beneficial to them, they can exercise their right of converting their debentures into shares or new class of debentures.”

Which of the following is NOT a way to redeem the debentures?

Answer & explanation

Correct answer: option 4

The correct answer is Option (4) → Conversion into shares only NOT in new debentures

Option (1) Payment in Instalments — A method of redemption. The debenture liability is paid off in parts on fixed dates, the debentures being chosen by drawing lots.
Option (2) Payment in Lumpsum — A method of redemption. The whole amount is paid to the debentureholders on maturity.
Option (3) Purchase in open Market — A method of redemption. The company buys its own debentures and cancels them.
Option (4) Conversion into shares only NOT in new debentures — Correct. Conversion may be into shares or into a new class of debentures; excluding new debentures misstates the method.