Condition of Average under Fire Policy

A risk has been covered under the Fire Policy. It had a Reinstatement Value Clause.

A fire took place, and several machineries were fully gutted.

The insured decided not to reinstate the machinery. The insured agreed to accept the market value of the machinery.

The Sum Insured of the Machinery was INR 70 Crores.

The reinstatement Value of the Machinery was INR 100 Crores.

Market Value of the Machinery was INR 60 Crores.

Should Under Insurance be applied in this case?

Would your answer be the same if the risk was smaller and were given a Bharat Laghu Udyam Suraksha Policy?

The correct answer is that Under Insurance would not have been applied under the fire policy.

However, a similar situation under the Bharat Laghu Udyam Suraksha policy, Under Insurance would have been applied.

Please provide the logic for the above answers in the comments section.