Hello Harsha
Welcome to Microsoft Q&A Platform, thanks for posting your query here.
It looks like there was an error while creating the Linux virtual machine. The error message indicates that the VM allocation failed because the constraints applied were too restrictive. The constraints that were applied include networking constraints, VM size, and proximity placement group.
To resolve this issue, you can try removing some of the constraints and try again. For example, you can try creating the VM without the proximity placement group or with a different VM size. You can also check if there are any networking constraints that are causing the issue and try removing them.
Hope this helps.