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Question
Which of the following given statement is correct.
Statement 1 - "Debenture is written instrument acknowledging a debt under the common seal of the company"
Statement 2 - Debenture is oral instrument acknowledging a debt under the common seal of the company"
Options
Only Statement 1 is correct
Only Statement 2 is correct
Both the statements are correct
None of these
Solution
Only Statement 1 is correct.
Explanation:
The term "debenture" comes from the Latin word "debere," which meaning "to borrow." A debenture is a written instrument that bears the company's common seal and acknowledges a debt. It contains a contract for repayment of principal after a specified period, at intervals, or at the company's discretion, and for payment of interest at a fixed rate payable on fixed dates, commonly half-yearly or yearly.
