When the Grid has an explicit height and scrolling is enabled, it will obey it regardless of the number of rows.
If you need the widget to resize vertically, then remove the set height. If you don't need horizontal scrolling, also disable scrolling, which will simplify the Grid's HTML output and improve performance.
the Telerik team
Join us on our journey to create the world's most complete HTML 5 UI Framework - download Kendo UI