Insufficient bytes recieved

Thank you for explaining. Good catch!

I now see that in the lower right corner of the first image of Modbus Poll it shows
Port 5: 9600-8-E-1

The second image of Modbus Poll shows
Port 3: 9600-8-E-1

And in the ModScan Connection Details window it shows
Direct Connection to COM6
Baud Rate: 9600
Word Length: 8
Parity: NONE
Stop Bits: 1

Though, I'm still not sure how incorrect parity would cause the insufficient bytes error the OP was seeing. Perhaps the slave ignores parity errors and Modbus Poll discards characters with parity errors, resulting in Modbus Poll only seeing some of the response characters.
Dear Jschulze and Briank,
I had a meeting with the manufacturer. He explained why I was getting insufficient bytes received an error on Modbus Poll software and also the proper procedure for changing node address of rotary encoder.
1. In Modbus poll parity should be selected to none and make sure baud rate should be 9600.
2. In the read and write definition Address should be 1 instead of 0 this was the reason for not getting data from the encoder.
3. For changing node address register 261 should be changed to desire ID and these setting should be saved by changing
register 262 to 1.
4. Make sure to click on send option while performing the Write Multiple registers (Function code 16).
5. After providing a power cycle once the ID of the encoder will be changed.

I have attached my go-to user manual with this reply and conclude that this topic should be reported as Solved.