TMI Blog1944 (11) TMI 11X X X X Extracts X X X X X X X X Extracts X X X X ..... ys realised by the sale of those bonds and to take steps to carry out the terms of the scheme of those bonds. Being a private limited company, it cannot issue an invitation to the public to subscribe for any shares or debentures, and according to section 2(1), clause (13)( c ), Companies Act, if it issues such invitation to the public, it ceases to be a private company and becomes a public company liable to fulfil the obligations imposed upon a public company by the Act and the rules. One of such obligations, from which a private limited company is exempt, is to file three copies of the annual balance-sheet and profit and loss account with the Registrar of Companies after they have been laid before the company at the general meeting, and an ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ted from being offered to the public by a private limited company. A form of the Patron Bond, is produced as Exhibit A. It bears a serial number and its title at the top is "The India Patron Bank Limited" and below it "Patron Bond, Rs. 10 only." It then goes on to say: "In consideration of Mr. (name of the holder) having paid Rs 10 as the purchase price of Patron Bond in the India Patron Bank Limit ed, Sholapur, it is hereby agreed and declared by the said Bank that the said Bank will pay all money to Mr. (holder) that may hereafter become due in respect of this Bond, on terms and conditions and rules and regulations printed on the reverse. In witness whereof the common seal of the Bank has been affixed and the Manager of the Bank has he ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... found a legal definition of the word "debenture." In Levy v. Abercorris Slate and Slab Co. [1887] 37 Ch. D. 260 , Chitty, J., defined a debenture as "any document which either creates a debt or acknowledges it," and he says that any document which fulfils either of those conditions is a debenture. In British India Steam Navigation Co. v. Commissioners of Inland Revenue [1881] 7 Q.B.D. 165 , Lindley, J., hold that a document which on the face of it was called a debenture and recorded indebtedness and was one of a series was to be dealt with as a debenture under the Stamp Act. He observed (page 172): "Now, what the correct meaning of 'debenture' is, I do not know. I do not find anywhere any precise definition of it. We know that ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... company does not issue them as debentures but sells them for a price. It is wholly immaterial what the company calls them and the name given to them by the company does not prevent them from being debentures if in fact they are debentures. The next argument advanced is that they do not purport to be a charge on the company's assets. We find that in clause (7) of the rules and privileges it is provided that the reserve fund is to be utilised for payment of guaranteed amounts payable to the holders under clauses (5) and (6). Thus the reserve fund being ear-marked and set apart for the repayment of the amount of the bonds to the bond-holders, a charge is tacitly created on that reserve fund. There is no doubt that if the company has other asse ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tics should be present and some of them are almost the antithesis the one of the other. After considering these characteristics and in holding certain income stock certificates to be debentures, he observed (page 15): "Now, Sir Francis Palmer in his catalogue of the characteristics of a debenture says: 'A debenture is, as a general rule, one of a series.' This document is certainly one of a series. The term 'debenture' is applied, as a general rule, to instruments issued by a company. This instrument is issued by a company. It is not issued, it is true, under seal, A debenture usually provides for the payment of a specific principal sum at a specific date, but that, as he points out in the paragraph, is not essential, for there are milli ..... X X X X Extracts X X X X X X X X Extracts X X X X
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