Also, I added "agentinfo localhost" in the loop and it gave me output of proxy server by which the target server is connected.
If I am not wrong it should be application server as type two script run against application servers..
type 2 scripts run 'against' the target list just like a type 1 script does. the only difference is that a type 1 script spawns 1 instance of the script per target and cd's into the target where as the type 2 script runs as a single instance no matter how many targets and does not automatically cd into anything.
i suspect you need to configure your appserver to use the NSH Proxy that you should also configure on it. eg setup the nsh proxy and on the appserver(s) change the secure file - remove 'port=4750' and add 'appserver_protocol=ssoproxy'
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This really helped, but main issue was we didn't had our Proxysvcurl and port set properly, which was causing this issue after we updated the secure file to suggested modifications.
I updated the port and URL, then restarted the app server, then everything seems to work fine.