Passive voice word order: "by-agent" before or after adverbials?

In a school test, a student wrote these passive transformations:
a) The thief was caught by the police near the city gallery.
​b) All the material is reviewed by the students before the exam.

The teacher corrected these, indicating that the "by + agent" phrase should be moved to the very end of the sentence (after near the city gallery and before the exam).

Is there a strict rule in English grammar regarding this? Who is correct here, the student or the teacher? ​(Attached is the image of the test for reference)

Your sentences are correct and idiomatic. As a native English speaker I personally find them more natural than the corrections.

The acceptability of the order is confirmed by the example from BBC Learning English cited in a comment above: "The internet is used by millions of people every day."

Be aware though that sometimes sentences with structure like yours can be ambiguous. As an example consider

"The form was completed by the man in the library."

In this case you cannot tell for certain whether the man in the library completed the form (possibly somewhere else) or whether the form was completed in the library by the man (who might now be somewhere else).

In your examples though, there is no ambiguity. In the first sentence, if the police are identified as being near the city gallery when the thief was arrested, then that is where he was arrested. In the second sentence the students cannot be described as being "before the exam."