Is it Legal ?

Selling the mortgaged property is the harsh and extreme step on the part of bank. If the loanee do not repay his loan amount even after complaint under section 138 NI Act then no chance remains with the bank to follow your suggestion.

Giving cheque towards repayment of loan and subsequently dishounouring it,  is distinct offence. The remedies mentioned by you are civil remedies and bank is at liberty to chose any action as it deem fit. It is not illegal. but several distinct legal rights available to bank.

Thanks for reply!
lets see it - for intance i gave rs. 10,000/- to A and in return as "security" he
gave me a cheque of rs. 10,000/- . here the cheque is given as
security and my money is unsecured loan (no security except cheque) , but in bank
loan case we have mortgaged property as security and bank further has
right to charge penal interest/enforcement of security and i have read in some case laws that
cheque u/s 138 should be given as "security" but in this case
security is land and parties have legal civil contract between them, and it's on will of borrower to pay though cash/cheque...

so i think this should/must not fall u/s 138, and it's matter of
proper trial & serious proceedings in higher courts to determine
whether it falls u/s 138 or not... i think it has not been tested properly..