Cash paid under a debenture can validate a floating charge even when used to clear existing debt and support ongoing supply.

Cash advanced under a debenture may count as "cash paid to the company" where, in substance, the company receives the money as part of a genuine business transaction, even if part is applied to an existing debt or to secure continued trade supplies. The Court treated the arrangement as a whole and rejected a narrow reading that would exclude cash merely because it was earmarked for discharge of an antecedent liability. On that basis, the floating charge was valid to the extent of the advance, and the debenture was not invalid for want of qualifying cash.

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Issues: Whether the amount secured by the debenture, though applied in part to pay an existing debt and to secure continued trade supplies, constituted "cash paid to the company" within section 266 of the Companies Act, 1929, so as to validate the floating charge to that extent.

Analysis: The relevant inquiry was whether, in substance, cash had been paid to the company, not whether the transaction could be dissected into separate parts or whether the money was later used to discharge an antecedent liability. The Court held that the statutory words were plain and did not justify importing a limitation that the cash must be absolutely and unconditionally paid, or that it could never qualify if applied to an existing debt. On the facts, the advance was a genuine business transaction: money was paid to the company on the debenture, the company used part of it to satisfy a trade debt, and the arrangement secured continued supply of goods and enabled the business to continue. The transaction was therefore to be judged as a whole, and in substance the company received cash.

Conclusion: The amount advanced under the debenture was cash paid to the company within section 266, and the floating charge was valid to that extent.

Final Conclusion: The debenture was not invalid to the extent challenged, and the liquidator's application failed.

Ratio Decidendi: For section 266 of the Companies Act, 1929, the test is whether cash was in substance paid to the company as part of the debenture transaction; cash does not cease to be "paid to the company" merely because the company is required to apply it in discharge of an existing liability or in furtherance of a continuing business arrangement.

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