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In a pan, melt 1 tbsp salted butter. Add 1/2 tsp turmeric powder, 1 tsp red chili powder, and 1 tsp coriander powder. Mix well until fragrant.
Add 200 grams cubed paneer to the pan and fry for a minute until lightly coated with spices. Then add 1 medium diced onion, 1 medium diced green bell pepper, and 2 whole green chilies. Roast for a couple of minutes until vegetables are slightly tender-crisp. Remove from pan and set aside.
In the same pan, add 2 tbsp oil. Add 1 bay leaf, 4-5 black peppercorns, and 2-3 green cardamoms. Sauté for a few seconds. Add 1 large finely chopped onion and sauté until golden brown, about 3-4 minutes.
Add 1 tbsp ginger-garlic paste and sauté for 1-2 minutes until the raw smell disappears. Add salt to taste, 1/2 tsp turmeric powder, and 1 tsp red chili powder. Mix well and cook for 30 seconds.
Pour in 1 cup tomato puree. Mix thoroughly and cook, stirring occasionally, until the oil separates from the mixture, about 5-7 minutes.
Add 1 tbsp coriander-cumin powder (dhaniya jeera powder) and mix. Then add the previously fried paneer, diced onions, bell peppers, and green chilies back into the pan. Mix everything together really well, ensuring the paneer and vegetables are coated with the gravy.
Add 1 tsp garam masala. If a thinner gravy is desired, add 1/4 cup water (or as needed) and bring to a gentle simmer. Stir in 2 tbsp fresh cream and 1 tsp crushed kasuri methi. Mix well and cook for another 1-2 minutes.
Your Kadai Paneer is ready to serve. Enjoy hot with rotis or parathas.
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