This is just speculation, pure guesswork, but my thoughts are that Seadrill decided that negotiating a contract cancellation would be better done without their costly asset being under arrest. Their definition of a level playing field.
Of course, ONGC and the Indian government see it the opposite way, that arrest of the vessel is their only leverage in a negotiation.
Although "arrest" and "courts" are mentioned, I think (no lawyer am I) this is a civil court matter, so some entity will pay some other entity, and some lawyers will make money, and the world will go on....