Heat 2 tablespoons oil or ghee in a pan. Add slit green chilies, peeled garlic and ginger. Saute well.
Add cubed onions and saute well till they turn slight brown. Cool down a bit.
Transfer to a mixer jar, add cashews and grind to a fine paste.
Heat the remaining oil in a pan. Add bay leaf, cloves and cardamom. Saute well.
Now add the prepared onion paste and saute well till the oil separates.
Add 1/2 cup water and bring to a boil.
Now add salt to taste, chili powder and coriander powder. Mix well and cook for 3-4 minutes.
Lower the flame and add the whisked curd very slowly. Stir as you add the curd. Mix well and simmer for 7-8 minutes. If you are a beginner, you can switch off the flame and add the curd. Mix very well and then continue to cook.
Once the gravy boils and fat releases slightly, add freshly ground pepper powder. I used a pepper mill for this.
Now if you want you can add 2 tablespoons fresh cream. I did not add as the gravy is very rich with curd, cashews.
Add the paneer cubes and gently mix. Simmer for 2 minutes. Serve paneer kalimirch hot with naan or roti. This curry also goes very well jeera rice.