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The correct answer is option 2, which states that statement II only is correct.
Explanation:
Statement I is incorrect. During Sher Shah`s reign, the village panchayat and zamindars were indeed allowed to deal with civil and criminal cases at the local level. Sher Shah implemented land reforms that strengthened the position of the zamindars, who were responsible for collecting revenue and maintaining law and order in their jurisdictions.
Statement II is correct. Sher Shah set up army cantonments in different parts of his empire and stationed a strong garrison in each of them. This was done to maintain effective control over the territories and to protect his empire from external threats.
Therefore, only statement II is correct, and the correct answer is option 2.