Two Turing machines $M_1$ and $M_2$ with $L(M_1) \subseteq L(M_2)$
"Halt" is not synonymous with "accept", although the latter implies the former. A TM can halt and reject. On the other hand, $L(M)$ stands for the set of words accepted by $M$, not the words it halts for.

Hence, alternative (C) is correct. (B) is incorrect because $M_1$ could halt on and reject a word which is accepted by $M_2$ (i.e., a word in $L(M_2) \setminus L(M_1)$), or for which $M_2$ does not halt, even.

Note the question makes little sense, if any, if we assume $M_1$ and $M_2$ to be deciders since, then, all alternatives are correct, (A) because the premise is always false (since $M_1$ always halts) and the others because the respective implications are always true.