I don't know whether they are lying because they are dishonest - I don't know enough about the particular indian culture you're dealing with. It could be just an imcompetent set of people, or it could be the sort of thing that some cultures acceptably lie about (like when we say 'no, you don't look fat in that'). You see it as the height of rudeness, perhaps they see it as saving face or something.

I guess my point is that unless you're well versed in the culture, it's easy to trip over these things.