Drain the cashews and add them to a blender along with the tomatoes, ginger, garlic, and 1/2 cup of water. Blend until smooth.
Heat the oil in a large pot over medium heat. Add the cumin seeds, coriander seeds, bay leaf, cinnamon stick, and cloves. Cook for 1 minute, or until fragrant.
Add the turmeric powder, red chili powder, garam masala powder, kasuri methi, sugar, and salt. Cook for 30 seconds, or until fragrant.
Add the cashew-tomato puree to the pot and cook for 10 minutes, or until the gravy thickens.
Add the water and bring to a simmer. Cook for 15 minutes, or until the gravy is flavorful.
Add the paneer cubes to the pot and cook for 5 minutes, or until heated through.
Stir in the butter and cream. Bring to a simmer and cook for 1 minute, or until the butter melts.
Garnish with cilantro and serve with rice or naan.