Covid Related Downsizing With Meager Compensation

I work for a 7 year old IT startup that has deep fundings from abroad. The company currently has around 3500 employees. I have been working here for the past 4 years 9 months in a middle management position. Yesterday all of a sudden my company CEO announced a downsize of the manpower and my manager has asked me to resign over a call. They are providing a very meager settlement if I resign. Also mentioned if I won't resign, I will be terminated with a bad remark in my relieving letter. I had to travel last week from Bangalore to a village in another state due to the sad demise of my father in law. Till we get permission from the Karnataka government, I won't be able to reach back Bangalore. This means I have to stay jobless for quite some time as I won't be able to attend any interviews in Bangalore. Kindly suggest if I should put my papers or follow a legal arbitration to get better severance pay or continuation of my employment.