The correct answer is: C. Either I or II follows.
The statement “Majority of the students have failed in one paper in the first semester examination” does not provide enough information to determine whether or not all those students who failed should be asked to drop out of the course or whether or not the faculty teaching the paper should be asked to resign. It is possible that the students failed because the material was too difficult, or because the teaching was not effective, or because the students did not put in enough effort. It is also possible that the students failed for a combination of these reasons. Without more information, it is impossible to say for sure what caused the students to fail and what should be done about it.
Therefore, either course of action I or course of action II could be appropriate, depending on the specific circumstances.