If he had a valid ticket, was there on time, followed all the rules, but somehow AC could not handle him, surely the least they could do was to rebook him.

Actually one could argue that this was a case of denied boarding. Although I seem to remember that the tariffs only specify conditions for denied boarding due to overbooking.

This is the sort of situation for which there ought to be some compensation mechanism. But I doubt that there currently is one.