This statement refers to the downstream (d/s) slope of a dam or embankment. The "critical condition" for a downstream slope typically means the situation where the slope is most likely to fail (i.e., become unstable). When the reservoir is full, the water level is at its highest, creating maximum hydraulic pressure. Additionally, "percolation at its maximum rate" implies that seepage (water flowing through the dam or embankment) is at its peak. This condition often leads to increased pore water pressure in the downstream slope, which reduces the effective stress in the soil and can lead to slope failure (e.g., a landslide or slumping). In geotechnical engineering, this is indeed considered a critical condition for the stability of the downstream slope, as it increases the risk of failure. Therefore, Statement (I) is true.
However, for a downstream slope under the conditions described (reservoir full, maximum percolation), the seepage force generally acts to destabilize the slope, not stabilize it. Therefore, Statement (II) is false.