Char the tomatoes directly on a gas flame or under a broiler, turning occasionally until the skin blisters and blackens in spots. Let them cool slightly, then roughly chop.
In a blender, combine charred tomatoes, onions, ginger, garlic, and green chilies. Blend to a smooth puree without adding water.
Cook the Gravy
Heat 2 tablespoons butter and 1 tablespoon oil in a heavy-bottomed pan or kadhai over medium heat. Add bay leaf, cardamom, cinnamon, and cumin seeds. Let them sizzle for 10 to 15 seconds until fragrant.
Pour in the tomato-onion puree carefully as it will splatter. Cook on medium heat, stirring frequently for 10 to 12 minutes. This bhuna process is crucial. The puree will thicken, darken, and oil will start separating from the sides.
Add Kashmiri chili powder, coriander powder, and turmeric. Mix well and cook for another 2 minutes, stirring continuously to prevent burning.
Add 1 cup water to achieve desired consistency. The gravy should be medium-thick, coating the back of a spoon. Season with salt and bring to a gentle simmer.
Finish the Curry
Meanwhile, soak paneer cubes in warm water for 10 minutes to keep them soft. Drain before using.
Add garam masala and sugar if using. Simmer the gravy for 3 to 4 minutes on low heat.
Stir in the cream and mix gently. Add the drained paneer cubes and cook for 3 to 4 minutes on low heat, allowing the paneer to absorb flavors without becoming rubbery.
Crush kasuri methi between your palms and sprinkle over the curry. Turn off the heat.
Add 2 tablespoons cold butter and swirl the pan gently until it melts into the gravy, creating a glossy finish. Do not stir vigorously.
Garnish with a drizzle of cream and serve hot.
Notes
Equipment - Heavy-bottomed pan or kadhai, blender, gas stove or broiler for charring.Paneer texture - Always soak store-bought paneer in warm water before cooking. For extra-soft paneer, briefly pan-fry the cubes in butter until golden before adding to gravy.Make-ahead - Prepare the gravy up to step 6 and refrigerate for up to 2 days. Reheat, then add cream and paneer fresh when serving.Spice level - Kashmiri chili powder is mild. For more heat, add regular chili powder or cayenne pepper to taste.Vegan adaptation - Use firm tofu instead of paneer, replace butter with vegan butter or oil, and use cashew cream blended from soaked cashews.Consistency control - If the gravy becomes too thick, add warm water or milk. If too thin, simmer uncovered for a few extra minutes.Color enhancement - For deeper red color, add a small pinch of red food color or beetroot powder, though Kashmiri chili should provide good color naturally.