Hi Rahul,
If you are disconnected, Option 3 "will happen".
We have taken into consideration issues like this and built in a stop to the timer as soon as the connection gets disconnected. You will either be asked to continue from the same question, or you'll be taken back to the Student Center where you can click on the resume button next to the test that was in progress.
If you have any other questions, please feel free to contact us at
techsupport@manhattangmat.com
Best,
Sam Edla
ManhattanGMAT IT Department
212-721-7400