Determination of rules of procedure.—
The arbitral tribunal shall not be bound by the Code of Civil Procedure, 1908 (5 of 1908) or the Indian Evidence Act, 1872 (1 of 1872).
Subject to this Part, the parties are free to agree on the procedure to be followed by the arbitral tribunal in conducting its proceedings.
Failing any agreement referred to in sub-section (2), the arbitral tribunal may, subject to this Part, conduct the proceedings in the manner it considers appropriate.
The power of the arbitral tribunal under sub-section (3) includes the power to determine the admissibility, relevance, materiality and weight of any evidence.
From the above the sub clause 4 should elicit answer to your query,which if read withsecrio2(6):
Where this Part, except section 28, leaves the parties free to determine a certain issue, that freedom shall include the right of the parties to determine that issue.
Thus in my opinion there is no illegality in it(?)