Pour mustard oil into the same cooking pot and let heat up on low medium heat until it is a bit smoky.
To the warm oil, add the cinnamon stick, cumin seeds, bay leaf, ginger juliennes and green chili halves. Saute spices in oil for 8-10 seconds taking care not to burn the spices.
Add the chopped onions to the pot next and on low medium heat, fry the onions until they are nicely golden brown. This could take 7-9 minutes.
Next, add the garlic paste and fry with the onions for 20-30 seconds or until the raw smell goes away.
Lower the heat and add the marinated chicken to the onions. Sprinkle kashmiri red chili powder and 1 teaspoon salt over the chicken. Toss the chicken with the onions, stirring continuously for next 1.5 to 2 minutes to ensure the yogurt warms through without curdling
As soon as chicken is mixed, bump up the heat to medium and start stir frying the chicken. This process, known as bhunai, requires optimal heat. If the heat is too low, the chicken and yogurt will release their juices, making the kadai watery. If the heat is too high, the chicken may sear on the outside too quickly but remain raw inside. Depending on the how heavy it is and width of your cooking pot, you can do the bhunai on low-medium to medium heat. Adjust heat as needed.
Stir fry the chicken for about 5-7 mniutes and then add the tomato puree and sugar. Also sprinkle 2.5 tablespoon of kadai masala powder that we prepared earlier.
Continue the bhunai while stirring intermittently for another 12-15 minutes or until the chicken is cooked through and you see tiny bubbles of oil releasing from the sauce. At this stage if you wish for a little gravy, you can add ? to ½ cup water to adjust the consistency of sauce. After you add water, let cook for 2-4 minutes until water forms part of the sauce.
To the simmering kadai chicken, add the onion petals, bell peppers, ½ teaspoon kadai masala, garam masala powder, kasuri methi and a dollop of ghee (or butter). Mix well and cook for 5 minutes. Avoid overcooking else the peppers and onions will become too soft.
Garnish with chopped cilantro and let rest for 15-20 minutes before serving. Serve with warm indian flatbreads, steamed basmati rice or jeera rice.