Hi Bipin,
The auto-fit columns functionality requires various calculations and renderings of the Grid elements, so it is not an operation that we want to provide out of the box on "any" Grid update. What I can suggest in this case is to bind to Grid events that you are interested in and make a call to auto-fit the columns.
Regarding the combination of auto-fit and column resizing - this is possible with the current version - you can resize the columns after they have been auto-fitted.
If you auto-fit the columns after column resizing, then the previous column widths will be lost as auto-fitting is done depending on the content of the cells and independently by any specific width defined by user actions.
If you want to keep some previously expanded widths, then a possible approach is to manually track which columns have been resized using the state events of the Grid (for when a column width is updated) and restore these widths after auto-fitting
Regards,
Stamo Gochev
Progress Telerik