You couldn't be more correct on how a true contest ought to be structured. The basis as stated by you is better.
We are now left with an undefinable tragedy for we will never know how Mauli and Sumedha would have sung the semi-classicals and fared in this category. In that respect it is a very sad ending.
The elimination basis may be OK for American Idol but it is not sutable for Indian music which is so much broader. Also, our audience is different.