Prepare the Kadai Masala:
Dry roast coriander seeds, dried red chilies, cardamoms, fennel seeds, cloves, and cinnamon on a low heat. Once toasted, cool and grind into a coarse powder. Set aside.
Sauté the Onions and Cashews:
Heat 1 tablespoon of oil or ghee in a pan. Add sliced onions and cashew nuts. Sauté until onions are golden. Add chopped tomatoes and cook until mushy. Let this mixture cool and blend into a smooth paste.
Cook the Vegetables and Paneer:
In the same pan, heat another ½ tablespoon oil. Sauté bell peppers and onions on high heat until half-cooked, then add paneer cubes and sauté for another 1-2 minutes. Set aside.
Make the Gravy:
Heat another tablespoon of oil or ghee in the pan. Add ginger-garlic paste and sauté until fragrant. Add the freshly ground kadai masala and sauté for 2-3 minutes. Add the onion-tomato paste, Kashmiri red chili powder, and garam masala. Cook for 2 minutes.
Simmer the Gravy:
Add 1½ to 2 cups of water and salt. Bring it to a boil, then reduce the heat and simmer until the gravy thickens and the oil separates.
Add Vegetables and Paneer:
Add the sautéed bell peppers, onions, and paneer to the gravy. Mix well and cook for 2 more minutes. Add kasuri methi, ginger juliennes, and coriander leaves.
Rest and Serve:
Cover and let the Kadai Paneer rest for 15 minutes. Serve hot with roti, naan, or jeera rice.