We're all built differently. Some people will raise their arm straight up and the thumb will naturally want to be up but for others it may be more toward the 3 o:clock position. The idea is to adopt a grip that will naturally return the clubface somewhat square to the target line at impact. If you otherwise had no problem with their teaching method grant your instructor the courtesy of talking with them first. Try to determine what they had in mind in moving your grip to a neutral position. It is true that for every action there's a reaction and they may have had one in mind but you responded in a different way than they expected.
BTW, I'm normally a bit on the weak side of neutral but change the strength of my grip from very weak to very strong depending on the shot-shape I'm looking for. That accompanied by opening and closing the stance and clubface at address will give a golfer a wide range of slot selection. A few weeks ago a gentleman at the range asked me if I knew how to hit a deliberate slice. I showed him, hitting 45 degrees left of the target and having the ball slice back to the green (easy). Then I demonstrated taking the ball in the other direction with a high hook (hard). These are shots you don't want to have to hit as they're really low percentage. Better to not get in that position but nice to be able to deal with it should one get an unlucky bounce, the match is on the line, and there's little choice but to take the chance.