1. Purée onion in food processor.
2. Heat oil in pot over medium heat. Add mustard seeds, cumin and bay leaf. Cook 1 minute, or until fragrant.
3. Add onion and garlic, and sauté 5 to 7 minutes, or until browned. Stir in tomato sauce, coriander, garam masala, turmeric, salt and paprika. Simmer 10 minutes, or until sauce thickens, stirring occasionally. Add up to 1/2 cup water if sauce is too thick.
4. Stir in peas, sour cream and sugar. Simmer 5 minutes, or until peas are heated through.
5. Fold in paneer, and cook 3 minutes more. Remove bay leaf, and serve hot with basmati rice or naan bread.