Defects acceptance rejection criteria on codes are written on numerical values. How are these numerical values for acceptance and rejection set achieved such as of undercut?

There could be many possibilities or aspects of your concern.  First you have to find out what are the causes of defects i.e. undercut. It could be a welder's low skill or could be a disturbed welding parameter. Come over the causes to minimize defects. Second keep in mind that the values for acceptance & rejection are always given in ranges not an exact value. So try to remain in between ranges if the defects are unavoidable.