Green’s Dictionary of Slang

towel v.

[oaken towel n.]

to beat, to cudgel, to thrash.

[UK]J. Dunton Life and Errors (1818) I 356: I would towel him myself (or make his Countryman do it) if I did not think him an honest man .
[UK]Crim.-Con. Gaz. 29 Sept. 46/2: Missy Crow say if she no go she get what ladies call a good towelling.
[UK]Fast Man n.d. n.p.: We don’t think it much of a lark to have a woman who towels you every night, and we are sorry for your pal.
[UK]Hotten Dict. of Modern Sl. etc. 111: towel to beat or whip. In Warwickshire an oaken stick is termed a towel ― whence, perhaps, the vulgar ver.
[UK] ‘’Arry on Politics’ in Punch 11 May 205/2: O scissors, to read our own Telly a-towelling wood-chopping Bill.

In phrases

towel up (v.)

(Aus.) to beat, to thrash.

[Aus](con. WWI) A.G. Pretty Gloss. Sl. [...] in the A.I.F. 1921–1924 (rev. t/s) n.p.: towelled up. Severely punished.
[Aus]Baker Popular Dict. Aus. Sl. 78: Towel up, to, to beat, thrash.
[Aus]A. Marshall ‘Bushman’ in Tell Us About the Turkey, Jo 98: ‘You’re next, O’Callaghan,’ he cried. ‘I’ll towel you up when I finish off this runt.’.
[Aus]Cusack & James Come in Spinner (1960) 398: I think you deserve the VC for the way you towelled Old Mole up.
[Aus]A. Buzo Rooted I iii: We won the doubles cup today [...] Towelled them up in no time.