Nick Clegg is resisting calls to reinstate the peer at the centre of the sexual harassment scandal engulfing the Liberal Democrats as the threat of legal action stokes party divisions.
Ex-Liberal Party leader Lord Steel urged the party leadership to "get a grip" on the crisis and lift the threat of expulsion from Lord Rennard.
But Mr Clegg told a meeting of his MPs that it remained the "right judgment" to suspend the former party chief executive over his refusal to apologise to the women behind the claims.
Lord Rennard has instructed a QC specialising in public law to advise him on the "lawfulness or otherwise" of the decision to launch a second inquiry into his conduct.
The move fuelled speculation that the former party chief executive - who has always denied the allegations against him - could seek an injunction blocking the inquiry.
A first inquiry, by a QC, found that while there was insufficient evidence to bring disciplinary charges, the women's claims were credible and Lord Rennard should apologise to them.
His refusal to make that apology despite being ordered to by Mr Clegg is now the subject of an inquiry into whether he has brought the party into disrepute.
Supporters of the peer dismissed the latest inquiry as no more than a "re-run" of the first.
Friends of Lord Rennard insist that he does not want the case to end up in the courts but claimed that attempts to resolve the issue through mediation had been blocked by Lib Dem president Tim Farron.
With one of the women whom he is alleged to have harassed refusing to rule out a counter claim against the peer, the Lib Dems are faced with the prospect of becoming embroiled in a series of damaging court battles which could drag on for months.
The row has opened up bitter divisions within the party with his supporters claiming he has been subjected to a kangaroo court while critics have argued that swifter, tougher action should have been taken against him.
Former leader Paddy Ashdown backed Mr Clegg's "courage" in handling the issue in the right way and appealed to Lord Rennard to end the turmoil by issuing an apology.
Lord Ashdown, who described himself as a "friend and admirer" of the peer, said it would "cost him nothing" to say sorry for any offence he had caused and could be done without compromising his insistence of innocence.
Mr Clegg told the weekly meeting of Lib Dem MPs that the party had sought to stick meticulously to its internal rules and was confident it had done so.
"It was the right judgment then. It's the right judgment now and he stands by it," a senior source said following the meeting at which he said it was clear Lib Dems felt "bruised".
But Lord Steel suggested it was for the leadership, not the peer, to soften its stance to aid the search for a compromise.
"Collectively the party leadership should get a grip on this and say it's got to be reversed.
"I think even now they could withdraw the threat to suspend him from membership and try to get an agreed compromise so the party can continue its normal work," he told ITV News.
There are no plans at present for Mr Clegg to speak at the equivalent meeting of the party's peers later today.
The Deputy Prime Minister will face questions about the latest developments when he takes to the airwaves for his weekly Call Clegg phone-in on LBC Radio 97.3.
It has been brought forward by 24 hours as Mr Clegg is later flying to Switzerland to join political, financial and business figures at the World Economic Forum in Davos.
It is the first time in four years that he has attended the event, where Prime Minister David Cameron and Chancellor George Osborne are among politicians due to participate.
Defending the decision to leave behind the turmoil, a source close to the Deputy Prime Minister said Mr Clegg felt he needed to counter Tory "damage" to the UK over Europe.
"With European leaders discussing reform, he was not prepared to simply allow Conservatives flirting with the exit door to be the only British voice in this important debate.
"Nick Clegg has become so concerned about the damage being done to the reputation of UK Plc by the Tory party that he wants to take every possible opportunity to set out a more balanced view to investors and the international community."
Under pressure from eurosceptic Tory MPs Mr Cameron has promised an in/out referendum on UK membership of the EU by 2017 - following a drive to negotiate better terms.