Section 35B of the CPC addresses what happens when a party fails to take a step the court required on a fixed date. The question asks what the court may do in that situation, and each option needs to be measured against what the section actually authorises.
Only the imposition of costs matches what Section 35B actually authorises for a party's failure to take a required step on the date fixed.
Therefore, the correct answer is Impose costs on the defaulting party.