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Let`s examine each option:
Option 1: Sikkim indeed has the least area among all Indian States. However, Kerala holds the highest literacy rate, not Chandigarh. Therefore, this option is incorrect.
Option 2: As stated already, Chandigarh does not hold the highest literacy rate. Maharashtra, on the other hand, does have the second-highest population after Uttar Pradesh among the 28 Indian States. Still, because of the inaccuracy with statement II, this option is invalid.
Option 3: This option only includes statement I which is accurate. However, it neglects statement III, which is also valid. Therefore, this option isn`t the best answer.
Option 4: Statement III is correct. Although this option doesn`t include the accurate statement I, it does not provide any false information. Thus, when choosing between options that all involve inaccurate statements, this is the best choice.
Therefore, the provided answer, option 4: `III only` is correct.