I approve to this idea. However, this is in regards to that indentation is taught as a part of class. If a student doesn't indent at all, and indentation was indeed a part of the class, then I would fail that one.
I wouldn't fail someone for having bad indentation, but for someone lacking it completely and utterly, I certainly would.
But this calls for another "indent automatically" features available in IDEs such as Visual Studio. Default indentation is better than nothing.