That's certainly not true. The fish will keep growing and will end up becoming stunted & deformed which leads to a very short & miserable life.
Besides, that argument is the same garbage that some stores will use to get people to purchase fishes that will certainly outgrow the space that is provided for them. Sure, the fish *might* stop "growing," but it certainly isn't going to live for very long in too small of an aquarium due to a variety of factors.
*sigh* Tank police have arrived...