Hi Satyam,
When creating the VM, please make sure the size you select supports Nested Virtualization and you select Standard security, as shown in screenshot below:
For VM sizes less than v5 you need to select Standard because Nested Virtualization isn't supported with Trusted Launch.
Please click Accept Answer if the above was helpful. If the above doesn't resolve the issue please add a comment with more details such as the VM size you selected.
Thanks.
-TP