Heat mustard oil in a pan until it starts to smoke; reduce heat and add bay leaf, dry red chilli, and cinnamon stick.
Add chopped onions and sauté until deeply golden and caramelized.
Stir in onion paste, ginger paste, garlic paste, and green chillies; cook until the raw smell disappears.
Add turmeric, coriander, red chilli powder, salt, and sugar; sauté until spices release oil.
Mix in tomato paste and cook until thickened.
Add chicken pieces and coat them well with the masala; cook uncovered for 8–10 minutes.
Add curd slowly while stirring to prevent curdling; cook until oil separates.
Cover and simmer on low heat until chicken is tender and richly coated in masala.