Its a shared server and I am unable to modify the domains CloudFlare/DNS settings.

As said the question mostly is why Nginx is freezing for the same setup and traffic while Apache handles it just fine.

If its an issue with the Nginx setting, what should I change? or is it a bug in Nginx?

Nginx was used as a reverse proxy on the server just to ease off situations like this and the server use limit_conn and limit_requests etc setting and low timeouts, but the TCP state exhaustion is making the server unusable