The correct answer is option 2, which states that statements 1 and 3 are correct.

Let`s break down each statement to understand why:

1. The Government of India Act, 1935 provided for the establishment of an All-India Federation based on the Union of British Indian Provinces and Princely States. This means that the act laid down the framework for a federal system in India, where power would be shared between British Indian provinces and princely states. Therefore, statement 1 is correct.

2. The act did not provide for franchise for all the people above 21 years of age. The act instead introduced separate electorates for different religious communities and introduced limited franchise based on property, education, and professional qualifications. Therefore, statement 2 is incorrect.

3. The act did grant power to Governors to veto legislative and administrative measures in their provinces. This was done in order to maintain control and supervision over the functioning of provinces. Therefore, statement 3 is correct.

In conclusion, option 2 is the correct answer as it accurately identifies statements 1 and 3 as correct.