Explanation:

- Section 84 of the Indian Penal Code (IPC) deals with the defence of insanity.

- It states that nothing is an offence if the person, at the time of doing it, was incapable of knowing the nature of the act due to unsoundness of mind.

- The law recognizes only “legal insanity” as a valid defence, not merely the medical diagnosis of a mental illness.

- Medical insanity refers to a clinical diagnosis by a psychiatrist, but does not always result in exemption from criminal liability.

- Legal insanity is when the mental state of the accused fits the criteria laid out in Section 84, focusing on the capacity to understand the nature and wrongfulness of the act.

- Moral insanity means a lack of moral sense or conscience but does not necessarily impair understanding or intent in the eyes of law.

- The correct answer is: Option 2, Legal insanity.