I'd agree with you. I don't see how it can be good to stream students in to different sets (which may or may not reflect their actual level of ability, there are lots of reasons why students flunk school and they are far more vulnerable to the effects of life at home, bullying, etc.) and say to them "it doesn't matter how hard you work, or if you put extra effort in to catch up - the highest grade you will ever be able to achieve is a B". Especially as that then chases people throughout the rest of their educational career.
We shouldn't put a cap on attainment.