Dear Mr. Gokuldas,
In mercantile system the Bank has a general lien over all forms of securities coming to possession of bank in the ordinary course of banking business. Money is best form of property and security.The Bank has the liberty to adjust the surplus sale proceeds in possession of the bank towards dues in the second loan.
Please see Sec.171 of Indian Contract Act which reads thus:
"Bankers, factor, wharfingers, attorneys of a High Court and policy brokers may, in the absence of a contract to the contrary, retain as a security for a general balance of account, any goods bailed to them; but no other person have a right retain, as a security for which balance, goods, bailed to them, unless is an express contract to that effect."
There is no agreement against bank restraining it to exercise BANKER'S LEIN.
The point of limitation arises only when the bank wants to go to court of law for recovery of the debt. But such necessity may not artise as surplus sale proceeds are in possession of the bank or comes to bank.