@woodrow and all,
many thanks for comments. I've re-read the relevant rules that woodrow highlighted at it does look like the umpire did not follow the correct rule in this case.
few further clarifications.
It was a junior tournament.
While I'm indeed not sure if a player was 30 or 40 seconds late I did ask the umpire what happened (since I only witnessed the incident from far). And the umpire stated that he penalized the player a game for being late after the break. I even asked if it should not be a warning than point penalty first - and he stated no, it's a game penalty. So given that it does not matter if a player was 30 or 40 seconds late - that umpire just used incorrect (and judging from woodrow's comment perhaps the rule that was in effect in 2011) rule.
now, when I read the rules, there's one more twist to this. Per rule, during 3 minute break the players are supposed to stay on the court. in the scenario at hand both players left the court. Which would imply that they informed the umpire that they are leaving. or perhaps it was clear mutual understanding that the players are leaving the court. If so - would it imply that the players do take a bathroom break even if that was not explicitly asked? It is almost as if both players decided NOT to take 3 minute break (since they did not stay on the court) and instead chose the bathroom break (or any other break that allows them to leave the court). Since the umpire apparently allowed for that - shouldn't he now follow the rule applied to bathroom/medical/attire breaks and therefore a 'reasonable time is allowed'?