After a successful election petition by the seat's runner-up, Alfred Manase, the court yesterday ruled that five ballot boxes in Mr Polye's Kandep electorate were not properly counted by the Electoral Commission.
RNZI reports Sam Basil is to be the new opposition leader after Mr Polye yesterday announced he respected the court decision and would step aside.
The Kandep leader has however voiced concern over the fairness of the decision, suggesting it had a political dimension to it, coming towards the end of PNG's five year parliamentary term.
The court has ordered a recount which is expected to take up to 30 days, during which time Mr Polye's status as an MP appears to be suspended.
Explaining his decision to hand over the reins to Sam Basil, Mr Polye told local media that he had to be consistent with his own calls for the prime minister Peter O'Neill to step aside.
Mr O'Neill has been implicated in a major fraud case related to allegedly illegal state payments to a law firm - fraud squad detectives have sought to arrest him in relation to this but the prime minister has refused to be questioned about it.