MN1 Section1(3) application - is section 2 of form required?

Hi,
I am applying for naturalisation of my two children:

Child 1, 4 years old - Born in UK when parents in UK. Ever since remained in the UK with Indian passport having dependent Tier 2 VISA. NOW BOTH PARENTS AND THIS CHILD HAVE ILR STAMPED ON THEIR PASSPORTS.

Child 2 - Born in UK last year. No passport and never travelled out of UK.

My question is whether Section 2 of MN1 form needs to be filled for applications under Section1(3) of the act?

My other question for later is whether not having an Indian passport cause any issues for getting OCI for the second child...once she has a British passport?

Please help...thanks

Section 2 is not required in your case. You can just write born in the UK in section 2.1 and cross the rest.
No idea about OCI.