The potential for abuse, as you describe above, is one major objection. It has been shown that punishment (of any form) applied arbitarily and without fairness or evidence (which is what happened to you) only leads to problems. It is hard to know for certain who is guilty in many cases in schools - you are relying on shaky evidence (usually it is one kid's word against another) and a teacher cannot be everywhere at once to be able to see all that goes on. Now, it is better to send both pupils to a time out zone (seperate time out zones) where they can think about thier actions than to apply a rather severe penalty to both which at least one of them is going to regard as unfair.

From my experience in schools, deterrents do not work. Not at all. Any more than capital punishment or the possession of nuclear weapons act as a deterrent against violence in the adult world. Humans have emotions and make mistakes and sometimes act without thinking about the consequences. Often the only thought is the short term reward rather than the nebulous possible future consequence. So, misbehaviour will still happen because it is more fun than work and punishment is something that happens in the future (and most children have a very arrogant 'it will never happen to me' attitude). And, even if you do get caught and beaten, hey - all the cool kids get caned, you can lord it over the other kids for a while.