communication between client and server is always encrypted and they don't even need MTProto for that, a simple TLS connection would be more then enough, and likely better. Also, that is likely true for all modern messaging apps..

The question proposed is that Telegram was monitoring private chats on the client side, but they do not need to do that unless E2E is enabled..

If you do not have E2E enabled then everything you send is in the open while in their servers..

So, if you do not have private chat enabled then Telegram does not need to make any type of client side monitoring, they can just monitor what is going trough their servers because it is all in the open..