You are not wrong ShubhamMishra, Networker save command is in charge of encrypting the backup data when a scheduled client backup job runs, which means, the encryption happens on client side.
Same happens when a recovering activity take place; encrypted backup data goes from Storage Node to client and then (and there) decrypted.
AES encryption directive works similar to others directives (exclusion, compression, etc); it change the way save command will do the backup and send the data to Storage Node.