It was by going through Databricks Support that we got an answer to this question. I am reposting it here in case others run into the same issue:

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I researched and found that this is expected behaviour with sorting when added to the dashboard.

Unfortunately, "ORDER BY" is not supported in backend aggregation.

This issue is being caused by new aggregation visualization. In the dashboard, backend aggregation is always used but backend aggregation doesn’t inherit the order by clause specified by the user. The workaround is to use X-axis sort in the visualization editor so the X-axis values are always sorted in the front end.

Although, We have a product feature ticket created to support it. there is no ETA at this moment.