It depends. In 1965, zero tolerance hadn't, fortunately, been thought of yet. (and whoever DID think of it should be beaten, not spanked).
First thing to do is to break it up. But before punishing anyone, I need to know the facts.
A couple of years prior to 1965, I was a small, sometimes too smart for his own good 9 year old, who was picked on and bullied daily at recess by a much larger classmate. One day I'd had enough and I snapped. The situation ended much like that photo, except I had my bully in a headlock and banged his head against the grass once or twice until he started crying (in those days, schoolyard fights stopped when somebody cried or got a bloody nose. Nobody EVER went to the ER for treatment following them).
A male teacher came and broke up the fight. And then shook my hand, and said: "it's about time". He wasn't my teacher, but he did do boys' PE, and had been watching this bullying for months. I don't even remember the teacher's name (though I remember the bully's very well). But I've never forgotten his kindness and support, and the fact that he was willing to react rationally, instead of in a knee-jerk fashion in accordance with some "policies and procedures" manual.