PANIPAT is the story of one of the most important chapters of history. The year is 1760. The Marathas under Sadashivrao Bhau (Arjun Kapoor) finally annexe the Udgiri Fort in present-day southern Maharashtra and thereby finish the Nizamshahi rule for good. The Marathas have now occupied most of India. Nana Saheb Peshwa (Mohnish Bahl) is very happy with the developments and especially with Sadashiv. Nana Saheb's wife Gopika Bai (Padmini Kolhapure) however feels insecure with her hubby's fondness for Sadashiv. At her insistence, Sadashiv is given the responsibility of handling the treasury. Sadashiv is shocked at this development as he has always been a warrior.
Nevertheless he accepts this change of duty. He also gets to spend time with Parvati Bai (Kriti Sanon), a physician. Both fall in love and get married. Meanwhile, while checking the finances, Sadashiv realises that the kingdoms up North are not paying the dues to the Marathas, as they had promised. A message is then sent to all these kings, including Mughal empeor Alamgir II (S M Zaheer). Najib-Ud-Daula (Mantra) is a part of the Mughal court and he's asked to leave. He's so frustrated with the high handedness of the Marathas that he decides to defeat them once and for all.
To do so, he knocks on the doors of Ahmed Shah Abdali (Sanjay Dutt), the Afghan ruler of Kandahar. At first, Abdali declines since he realises that Najib-Ud-Daula is seeking his help for his selfish gains. But then he also realises that if he manages to capture a large part of India, it would add to his prowess. Hence he sets off to India. The Marathas find out about Abdali's plans and that he is approaching with 1 lakh soldiers. Sadashiv however feels that despite having lesser number of soldiers, the Marathas can still defeat Abdali. Nana Saheb gives Sadashiv the responsibility of going up North to stop Abdali with 40,000 soldiers.
On the way, Sadashiv seeks help from various kingdoms and forges alliances. Most of them agree to be on his side and provide armymen. Shuja-Ud-Daula (Kunal R Kapoor) is the Wazir of Awadh and Sadashiv asks for his help as well. In return, he agrees to make him the Wazir of Delhi once Abdali is defeated. Shuja-Ud-Daula asks for this agreement in writing. The Marathas agree to do so and said that they'll return in a few days with the written assurance. In the interim, Abdali's men meet Shuja-Ud-Daula. They too make the same offer that he'll be made Delhi's Wazir and what's more, they get the written agreement with them. Shuja-Ud-Daula hence joins Abdali. This serves a blow for Sadashiv since Shuja-Ud-Daula's alliance would have helped him immensely. Nevertheless, he agrees to fight, come what may. What happens next forms the rest of the film.