Thank you for writing.
Local settings introduced to properties in the CellFormatting event have higher priority than the theme settings for the highlighting. What I would suggest is to also style the selection color in the CellFormatting event:
sender, Telerik.WinControls.UI.CellFormattingEventArgs e)
e.CellElement.BackColor = Color.Red;
e.CellElement.BackColor = Color.Yellow;
I hope this helps.
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