Interest is not payable/provided on _______________.

The correct answer is Option (3) → Debentures issued as collateral security

Debentures issued as collateral security are only an additional security for a loan the company has already taken. The lender gets them so that he can recover the loan if the company fails to repay it. No new borrowing is created by this issue, so interest runs on the loan, not on these debentures.

Debentures issued to vendors for consideration other than cash, to underwriters for their commission, or for cash are real debentures. The company owes the holders the face value, so interest is payable on all three.