The correct answer is option 1, which states that statements 1 and 2 are true. Let`s analyze each option to understand why.

Option 1:

1. The Constitution 74th Amendment Act does indeed envisage three types of urban local bodies in India, which are Municipal Corporation, Municipality, and City Council. This statement is true.

2. Municipal Corporations are indeed established in cities with a population greater than 1 million. This statement is also true.

Option 2:

This option states that statement 2 is true. While statement 2 is indeed true, option 2 ignores the fact that there are three types of urban local bodies mentioned in the Constitution 74th Amendment Act. Hence, option 2 is incorrect.

Option 3:

This option states that statements 1 and 3 are true. However, statement 3 is incorrect as the first Municipal Corporations established during British rule in India were in Bombay (now Mumbai) and Calcutta (now Kolkata). Hence, option 3 is incorrect.

Option 4:

This option states that statements 1, 2, and 3 are true. However, as explained above, statement 3 is incorrect. Hence, option 4 is incorrect.