While I drive in 3rd gear its fine, but if I try to apply brakes/stop acceleration suddenly, 3rd gear slips into neutral position (Not exactly neutral) and while I try to put third gear again, it produces a sound like I am not applying clutch.
Hope experts can suggest, what the problem is..
From your brief description, it sounds like the clutch is going out of it. If you smell anything like hot brakes during clutch usage, this may be the case. Also, if the RPMs do not have a linear (engine speed and vehicle speed go up together) as you accelerate, this may be another symptom. If you have the vehicle in 3rd gear at a slower speed and press hard on the gas pedal (for a short period of time), if the engine speed goes up without gaining significant amounts of speed is what I'm talking about.
EDIT: While rereading your post, it could also be the 3rd gear synchro is worn out.
