Heat 1 tbsp oil in a pan.
Add 1 tbsp butter. Once butter is melted, proceed to spices.
Add cumin seeds, peppercorns, cardamoms, cloves, bay leaf, black cardamom, and cinnamon stick. Sauté all the whole spices on low flame for 2 minutes.
Add chopped onions and cook until onions turn golden brown (about 2 minutes).
Add ginger-garlic paste, red chili powder, and turmeric powder. Sauté the paste until fragrant.
Add tomato puree and 1 tsp salt. Cover and cook until oil separates and masala thickens.
Mix in curd and cashew paste. Stir to blend and cook for 5 minutes.
In a separate pan, sauté paneer cubes in 2 tbsp butter for 1–2 minutes.
Toss paneer with green chilies, ginger juliennes, 1/2 tsp red chili powder, 1/4 tsp turmeric, and 1/2 tsp salt.
Add paneer to cooked masala.
Add garam masala, kasuri methi, sugar, and optional cream with water. Simmer for 10 minutes.
Top Paneer Butter Masala with chopped coriander. Serve hot with naan, roti, or jeera rice.