Well, maybe, but I wonder how most people would react if the TD said to them, "Hey, Steve, the guy who just beat you, Joe, has to go. He said you should take his place in the tournament. You play Fred next." Maybe that's how it was. Maybe not.
In the case of the OP, we don't really know what happened. We just have bits and pieces of how it went and mostly about the aftermath.
I do agree though that the TD made a major mistake. It's reminiscent of a double elimination tournament I played in where the TD ignored the chart on the losers' side and just matched up any losers who were waiting around to play. It's hard to find good help.