Heat the pan on a medium heat. Roast the peanuts and cashew nuts till they get light brown.
Let them cool and grind it to a fine powder.
Grind onion, tomato, green chillies, ginger and garlic and coriander seeds to a smooth paste without adding any water.
Heat 1 tsp of oil in a pan on medium heat and add cubed capsicum.
Cook till they are done 75%. Rest of cooking will be done in the gravy. Remove the cooked capsicum into a bowl.
Heat 2 tsp of oil in the same pan. Add bay leaf, cumin seeds and cloves. Let the cumin seeds sizzle.
Add onion tomato gravy. Mix well.
Cook till all the moisture from the gravy evaporates and the oil starts to leave from the sides of the pan.
Add chilli powder and salt. Mix well.
Add 1¼ cup of water. Mix well again. Allow it to boil.
Add nuts powder. Mix well.