Statement 1 is correct: The dissolution of the State Legislative Assembly is not mandatory. The Assembly may either be dissolved (leading to fresh elections) or kept under suspension (placing it in a state of dormancy until further decisions are made).

Statement 2 is incorrect: When President’s Rule is imposed in a state under Article 356, the Council of Ministers is always dismissed, as the state government is suspended and the Governor takes over the executive powers on behalf of the President.

Statement 3 is correct: The dissolution of local bodies is not a direct consequence of President’s Rule. Since municipalities and panchayats function independently under the State List (as per the 73rd and 74th Amendments), their existence remains unaffected unless the state government had already initiated their dissolution through legal provisions.

Thus, while the removal of the Council of Ministers is automatic, the dissolution of the Legislative Assembly is conditional, and local bodies remain largely unaffected.

Hence, the correct answer is option (B) 1 and 3 only.