The CPC generally favours deciding the real dispute between the real parties over dismissing a suit for a technical defect, and Order I, Rule 10 is where this philosophy shows up for party mistakes.
Since the Code prefers curing party defects over restarting or ending the litigation, the substitution-and-addition power is the one that fits.
\[ \boxed{\text{Permit substitution or addition of the proper defendant.}} \]Another way to reach the answer is to ask which of the four proposed outcomes actually lets the case reach a decision on the real dispute, since that is the guiding purpose behind Order I, Rule 10.
Only the substitution-and-addition option keeps the litigation on track toward a decision on the actual dispute.
Hence, the correct answer is Permit substitution or addition of the proper defendant.