Identify the grammatically correct sentence from the options given:

The correct answer is Option (3) → Of all the students, Ananya is the most diligent.

Degrees of comparison:

• The comparative (taller, more diligent) compares two persons or things; the superlative (tallest, most diligent) picks one out of three or more.
• Short adjectives add -er / -est (large, larger, largest); long adjectives such as diligent (hard-working) take more / most. The two are never used together.
• This sentence: "Of all the students" means a whole group, so the superlative "the most diligent" is correct.
  Example: This is the most beautiful painting in the gallery.

Why the Other Options are Incorrect?

Option 1: Mount Everest is the most highest peak in the world. — Incorrect. "Most highest" is a double superlative; "highest" is already the superlative.
Corrected: Mount Everest is the highest peak in the world.

Option 2: This is the more interesting of the novels. — Incorrect. "The more ... of" is used only when just two are compared (the more interesting of the two novels); "the novels" here means a group, so the superlative is needed.
Corrected: This is the most interesting of the novels.

Option 4: My house is more large than yours. — Incorrect. "Large" is a one-syllable adjective, so its comparative is "larger", not "more large".
Corrected: My house is larger than yours.

Contrast: two persons or things take the comparative, three or more the superlative; "more/most" is never added to an -er/-est form.