Clean and wash palak. Chop palak and one onion finely. Take the chopped palak and onion in a vessel. Add 1 cup of water and 1 tea spoon salt. Boil for 4 to 5 min. Switch off the flame and let it cool. Now make a fine paste out of it. Grind Kaju and grated coconut to fine paste (this paste is optional. It thickens the gravy and adds very good taste to it).
Heat 4 table spoons oil in a pan. Cut paneer to cubes and fry until golden color in the oil and keep it aside. Now to the same oil add cloves, bay leaf and cinnamon. When cloves starts spluttering add finely chopped onions and green chillies. Fry until the onions turn pink in color.
Now add ginger garlic paste and fry for few secs. Now add chilly powder, dhaniya powder and haldi. Stir well and add the palak paste to it. Add Salt and 1 tea spoon sugar(optional). Mix well and add the Paneer pieces and stir. Lower the flame, close the lid and cook for 5 to 6 mins.
Take the Palak Paneer curry into a serving bowl and garnish with fresh dhaniya (coriander) leaves. Palak Paneer curry is ready...........Serve hot with rotis, chapatis or rice........