In case of issue of debentures as collateral security, identify the correct statements.
(A) Cash is realised on such debenture as in the case of issue of other debenture
(B) Interest is paid on such debenture
(C) The holder can invoke the right/benefit of debenture
(D) No interest is paid on such debenture
(E) The holder has to release the security after the repayment of loan
Choose the correct answer from the options given below :
Answer & explanation
Correct answer: option 1
The correct answer is Option (1) → (C), (D) and (E) only
Debentures issued as collateral security are a secondary security given to a lender along with the primary security for a loan.
(A) Cash is realised on such debenture as in the case of issue of other debenture – Incorrect. No money is received; no liability is created by the issue.
(B) Interest is paid on such debenture – Incorrect. Interest is paid on the loan, not on the collateral debentures.
(C) The holder can invoke the right/benefit of debenture – Correct. If the company fails to repay the loan and the primary security falls short.
(D) No interest is paid on such debenture – Correct. As no debt arises from them.
(E) The holder has to release the security after the repayment of loan – Correct. On repayment the debentures are cancelled by a reverse entry.
NCERT (2026-27 edition): NCERT (2026-27 edition): NCERT (2026-27 edition):
|
