Fill in the blank with the most appropriate word.
A verb is used to express an occurrence, action, or state. It is the grammatical center of the predicate in a sentence.
An auxiliary verb is a verb which gives is used in the formation of tenses, moods, tones, etc.
Option B is correct as the speaker talks about everyone's state at the party at a given point of time (when I) and so, we use the past continuous tense to indicate something that was going on in the past.
The other options are wrong as no other tense can be used here.
The correct answer is B) arrived/ was having.