| British India Steam Navigation Co v IRC | |
|---|---|
 | |
| Court | High Court |
| Citation(s) | (1881) 7 QBD 165 |
| Court membership | |
| Judge(s) sitting | Lindley J |
| Keywords | |
| Security interest, debenture | |
British India Steam Navigation Co v Inland Revenue Commissioners (1881) 7 QBD 165 is a case relevant for UK commercial law and UK insolvency law case, concerning the definition of a debenture.
The British India Steam Navigation Company had undertaken on paper to pay the holder £100 on 30 November 1882 and pay interest half yearly at 5% pa. The paper said these were “debentures”. Meanwhile, the Stamp Act 1870, a taxation statute, said that “debentures” were subject to a higher rate of stamp duty. The company then tried to argue that in fact these were not debentures at all, and merely a “promissory note”. A. V. Dicey and Farrer Herschell QC appeared for the Revenue.
Lindley J held that the instruments were debentures and therefore subject to stamp duty. They were debentures because they were documents that acknowledged a debt. [1]
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 there are various kinds of instruments commonly called debentures. You may have mortgage debentures, which are charges of some kind on property. You may have debentures which are bonds; and, if this instrument were under seal, it would be a debentures of that kind. You may have a debenture which is nothing more than an acknowledgement of indebtedness. And you may have [as on the facts]… a statement by two directors that the company will pay a certain sum of money on a given day, and will also pay interest half-yearly at certain times and at a certain place upon production of certain coupons by the holder of the instrument. I think any of these things which I have referred to may be debentures within the Act.
In corporate finance, a debenture is a medium- to long-term debt instrument used by large companies to borrow money, at a fixed rate of interest. The legal term "debenture" originally referred to a document that either creates a debt or acknowledges it, but in some countries the term is now used interchangeably with bond, loan stock or note. A debenture is thus like a certificate of loan or a loan bond evidencing the company's liability to pay a specified amount with interest. Although the money raised by the debentures becomes a part of the company's capital structure, it does not become share capital. Senior debentures get paid before subordinate debentures, and there are varying rates of risk and payoff for these categories.
A floating charge is a security interest over a fund of changing assets of a company or other legal person. Unlike a fixed charge, which is created over ascertained and definite property, a floating charge is created over property of an ambulatory and shifting nature, such as receivables and stock.
Chose is a term used in common law tradition to refer to rights in property, specifically a combined bundle of rights. A chose describes the enforcement right which a party possesses in an object. The use of chose extends from the English use of French within the courts. In English and commonwealth law, all personal things fall into one of two categories, either choses in action or choses in possession. English law uses a chose to refer to a bundle of rights, traditionally relating to property which may be utilised in certain circumstances. Thus, a chose in action refers to a bundle of personal rights which can only be enforced or claimed by a chose-holder bringing an action through the court to enforce the action. In English law, this category is enormously wide. This is contrasted with a chose in possession which represents rights which can be enforced or acquired by taking physical possession of the chose. This may be, for example a legal mortgage. Both choses in possession and choses in action create separate proprietary interests. What differs between each is the method in which each chose may be enforced. This is dependent on the possessory nature of the reference object.
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