The correct option is
B they were playing with Delhi Public School the next day
When we're reporting a speech, we're narrating things that happened
or were said in the past. So, the speech will go one tense back.
In
reported speech, we add a reporting verb (usually 'said'), the subject
changes in narration ('he', 'she', 'it' or 'they') and the related words
also change.
Option B: For reporting Sanju's speech, the first point of view 'we' changes to third point of view 'they'. 'Are playing' is in the present continuous
and changes to 'were playing', the past continuous. The adverb 'tomorrow' will change to 'next day'.
So, the correct reported speech for the sentence "Tomorrow we are playing with Delhi Public School" is:
'He was... upset because they were playing with Delhi Public School the next day and...'
Hence option B is correct.
Option
A: 'Are playing' expresses the present continuous tense whereas the sentence must go one tense behind, from present continuous tense 'are playing' to past continuous 'were playing'.
Option C: Similarly, 'are playing' needs to be changed. Also, the word 'tomorrow' has not been changed in this option.
Option
D: The word 'tomorrow' has not been changed here.
Hence options A, C and D are incorrect.