We apply an induction on N. The base case N=1 is trivial. Suppose that the claim holds for N−1 and prove it for N⩾2.
Let us denote the path containing the upper left corner by P. If P is right-up, then every cell in P is in the top row or in the leftmost column. By the induction hypothesis, there are at least N−1 paths passing through the lower right (N−1)×(N−1) subgrid. Since P is not amongst them, we have at least N paths.
Next, assume that P is right-down. If P contains the lower right corner, then we get an (N−1)×(N−1) grid by removing P and glueing the remaining two parts together. The main idea is to extend P so that it contains the lower right corner and the above procedure gives a valid partition of an (N−1)×(N−1) grid.

We inductively construct Q, which denotes an extension of P as a right-down path. Initially, Q=P. Let A be the last cell of Q,B be the cell below A, and C be the cell to the right of A (if they exist). Suppose that A is not the lower right corner, and that (*) both B and C do not belong to the same path as A. Then, we can extend Q as follows (in case we have two or more options, we can choose any one of them to extend Q ).
1. If B belongs to a right-down path R, then we add the part of R, from B to its end, to Q.
2. If C belongs to a right-down path R, then we add the part of R, from C to its end, to Q.
3. If B belongs to a right-up path R which ends at B, then we add the part of R in the same column as B to Q.
4. If C belongs to a right-up path R which starts at C, then we add the part of R in the same row as C to Q.
5. Otherwise, B and C must belong to the same right-up path R. In this case, we add B and the cell to the right of B to Q.
Note that if B does not exist, then case (4) must hold. If C does not exist, then case (3) must hold.
It is easily seen that such an extension also satisfies the hypothesis (*), so we can repeat this construction to get an extension of P containing the lower right corner, denoted by Q. We show that this is a desired extension, i.e. the partition of an (N−1)×(N−1) grid obtained by removing Q and glueing the remaining two parts together consists of right-down or right-up paths.
Take a path R in the partition of the N×N grid intersecting Q. If the intersection of Q and R occurs in case (1) or case (2), then there exists a cell D in R such that the intersection of Q and R is the part of R from D to its end, so R remains a right-down path after removal of Q. Similarly, if the intersection of Q and R occurs in case (3) or case (4), then R remains a right-up path after removal of Q. If the intersection of Q and R occurs in case (5), then this intersection has exactly two adjacent cells. After the removal of these two cells (as we remove Q),R is divided into two parts that are glued into a right-up path.
Thus, we may apply the induction hypothesis to the resulting partition of an (N−1)×(N−1) grid, to find that it must contain at least N−1 paths. Since P is contained in Q and is not amongst these paths, the original partition must contain at least N paths.