The pharmacological effectiveness of indoles, benzoxazepines and benzodiazepines initiated our synthesis of indole fused benoxazepine/benzodiazepine heterocycles, along with enhanced biological usefulness of the fused rings. Activated indoles 5, 6 and 7 were synthesized using modified Bischler indole synthesis rearrangement. Indole 5 was substituted with the trichloroacetyl group at the C7 position, yielding 8, exclusively due to the increased nucleophilic character of C7. When trichloroacylated indole 8 was treated with basified ethanol or excess amminia, indole acid 9 and amide 10 were yielded, respectively. Indole amide 10 was expected to give indole fused benoxazepine/benzodiazepine 11a/11b on treatment with alpha halo ester followed by a coupling agent, but when the reaction was tried, an unexpectedly rearranged novel product, 1,3-bezodiazine 12, was obtained. The synthetic compounds were screened for anticholinesterase and antibacterial potential; results showed all products to be very important candidates for both activities, and their potential can be explored further. In addition, 1,3-bezodiazine 12 was explored by DFT studies, Hirshfeld surface charge analysis and structural insight to obrain a good picture of the structure and reactivity of the products for the design of derivatised drugs from the novel compound.