Is it ever appropriate for an instructor to take away a student's belt as discipline?

Two 12 year old students were outside the class engaged in horseplay. One had been told previously that if the instructor had to talk to him about horseplay again, he would take away his belt and he would have to earn it back. This is a 3rd year student with a purple belt. Another student walked by the two, saw them horseplaying, went inside and told the instructor who came out, took away the belt from the one, and made the other do push ups. 

I've never heard of this being done as discipline and was wondering if it is an appropriate form of discipline to use.

On a side note, the student was so upset about his belt being gone after 3 years of work, he quit. Not the best reaction but it happened.