Heat 1 tbsp butter and 1 tbsp cooking oil in a pan over medium heat. Lightly fry paneer cubes until golden brown on all sides. Remove and set aside. Blend soaked cashews with a little water to make a smooth paste. Set aside.
In the same pan, add remaining cooking oil and 1 tbsp butter. Add cinnamon stick, green cardamoms, cloves, and bay leaf. Sauté for 30 seconds until fragrant. Add chopped onions and green chilies. Sauté until onions are translucent and light golden.
Add ginger-garlic paste and sauté for 1 minute until the raw smell disappears. Add turmeric powder, red chili powder, coriander powder, and cumin powder. Mix well and cook for 30 seconds, adding a splash of water if needed to prevent burning.
Add tomato puree, sugar, and salt. Mix well. Cover and cook on medium-low heat for 10-15 minutes, stirring occasionally, until the oil separates from the masala.
Add the cashew paste and water. Mix thoroughly. Bring to a simmer and cook for another 5 minutes, stirring to prevent sticking.
Stir in the remaining 2 tbsp butter, garam masala, and kasoori methi. Gently add the fried paneer cubes. Reduce heat to low and stir in the heavy cream. Cook for 2-3 minutes, without boiling, to incorporate the cream.
Garnish with fresh coriander leaves. Serve hot with naan, roti, or rice.
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