Spotting a foul

A player last night fouled with his sleeve knocking one of his object balls off the rail into the middle of the table. The capt. picked up the ball and put it back where he thought it was and gave me the cue ball. My team said the ball stays and the capt said it is put back. we didn't see this clearly in the rules and he put the back into the middle of the table. What is correct?

The ball gets put back. The reasoning is that a player could foul by moving a ball into a strategic position by deliberately brushing it to block a pocket or freeze a shot and then give a ball in hand. It's still a ball in hand of course, but the ball gets put back.