Q.Interest on debentures is payable by the company ________. (A) only if the company has earned a profit in that year
(B) irrespective of whether the company has earned a profit
(C) only if the Board decides to declare it, as with dividend
(D) only after the shareholders' dividend has been paid in full

Interest on a debenture is a fixed contractual charge the company owes its creditor, and a contractual debt does not depend on how the company's year has gone. …

Interest on a debenture is a fixed contractual charge, payable at the agreed rate and intervals stated at the time of issue — this is the single sharpest difference between a debenture-holder's interest and a shareholder's dividend, which is payable only out of profit and only once declared.

(A) is incorrect: interest is not conditional on the company earning a profit — that condition applies to dividend, not interest.

(B) is correct: as a fixed debt obligation, interest must be paid regardless of profit; failing to pay it is a genuine default, which can expose the company to a Tribunal remedy under Section 71(8) of the Companies Act, 2013 on an aggrieved debenture-holder's application.

(C) is incorrect: dividend, not interest, requires a Board/shareholder declaration; interest is owed automatically once due, needing no separate declaration. …

Students often transfer dividend's 'paid only out of profit' rule onto debenture interest by treating both as the same kind of 'return on investment' — they are not: one is discretionary …