Transfer the water and cashews into a mixer jar and grind into a fine paste. Set aside.
To make the onion paste, in a mixer jar, combine the onions, ginger, garlic, green chilli and grind into a fine paste. Set aside.
Finally to make the Matar Butter Masala; heat butter in a heavy bottom pan over medium heat; add the bay leaf and the onion paste and saute for a good 2-3 minutes stirring continuously.
When the raw smell of the ginger garlic disappears, add salt, turmeric powder, cumin powder and red chilli powder. Saute for thirty seconds.
Next add the tomato puree, cover and cook for about 5 minutes or until the tomatoes get a bright red colour and are cooked completely.
Stir in the boiled peas along with the water and adjust the consistency of the gravy to your preference by adding more water if required.
Finally add in the sugar, kasuri methi and fresh cream, bring the Paneer Matar Masala to a brisk boil and turn off the heat.
Adjust the salt and seasoning according to your taste, stir in the freshly chopped coriander leaves and transfer the Paneer Matar Masala to a serving bowl.