The correct answer is D. Kannauj.
Kannauj was the capital of the Harsha Empire, which was founded by Harshavardhana in the 7th century CE. The empire stretched from the Himalayas in the north to the Narmada River in the south, and from the Brahmaputra River in the east to the Arabian Sea in the west. Kannauj was a major center of trade and culture during the Harsha Empire, and it remained an important city even after the empire collapsed.
Kashi (Varanasi) was an important city in ancient India, but it was not the capital of any major empire during the 7th century CE. Vajji was a small kingdom located in the Ganges Valley, and it was not powerful enough to challenge the Harsha Empire. Mal was a kingdom located in central India, and it was also not powerful enough to challenge the Harsha Empire.
Therefore, the only option that is consistent with the historical record is D. Kannauj.