Hi I am trying to restore backup on my new iphone 12 and while backing up the previous iphone 7 I did not set any encryption password and now i am getting an error of wrong password.

Hi !

If you still have the iPhone 7 with the data in it, you can try an iCloud Backup.

Here are more informations about encrypted backups : https://support.apple.com/en-ie/HT205220

I'm assuming you are using iTunes Backup on your computer? At some point in the past, you turned on Encrypt Backup and you created a password at that time. If you are now backing up even years later, your backup is still being encrypted and you would need know the encryption password you set up previously. I'm also going to guess, you didn't write this important password down somewhere for future recall?

cunchips34 recommendation to instead create an iCloud backup seems to be the simplest solution for your situation. You can do that directly on the iPhone 7.