When a company wants to purchase its own debentures for the purpose of cancellation, the method of debenture redemption which can be used is:
Answer & explanation
Correct answer: option 3
The correct answer is Option (3) → Purchase in open market
When a company buys its own debentures in the open market and cancels them at once, the redemption is called redemption by purchase in the open market. It is useful when the debentures are quoted below their redemption value.
Option (1) Payment in lumpsum — Incorrect. In lump sum payment the company pays all debentureholders at maturity under the terms of issue; it does not buy them in the market.
Option (2) Payment in instalments — Incorrect. In instalment payment, debentures chosen by draw of lots are redeemed at set intervals under the terms of issue.
Option (4) Conversion into shares or new debentures — Incorrect. Here debentureholders receive shares or new debentures in place of the old ones; no purchase is made.
NCERT (2026-27 edition): |