1. Login as a teacher, access the lesson and edit the settings.
2. Set the completion tracking to 'Show activity as complete when conditions are met'.
3. Select 'Student must receive a grade to complete this activity'.
4. Login as a student and attempt the lesson.
5. Check that a tick is shown opposite the lesson on the course page.
6. Login as the teacher again, access the course and check that the lesson is marked as complete for the student in Reports > Activity completion.

As you can see in the attached pic, student has received grade but the lesson is still shown as incomplete.
attached screens