The correct answer is option 2. According to the recommendation of Lord Clive, the `Dual Government` meant that the British East India Company would be responsible for fiscal matters, while the Indian rulers would handle all other aspects of administration. In this system, the Company would look after the financial aspects such as revenue collection, taxation, and trade. On the other hand, the Indian rulers would retain control over civil matters like law and order, justice, and day-to-day governance.

Option 1 is incorrect because it states that criminal justice would be left to the Nawabi officials, which is not accurate according to Lord Clive`s recommendation.

Option 3 is incorrect because it suggests that Indian rulers would deal with all matters of administration under the supervision of a Company official, which is not in alignment with the concept of `Dual Government`.

Option 4 is also incorrect as it states that Indian rulers would be merely titular heads with all powers directly dealt by the Company. However, Lord Clive`s recommendation allowed Indian rulers to retain authority in various administrative matters.

Therefore, option 2 is the correct answer.