Using a food processor, grind tomatoes, onion, garlic and ginger to a fine paste.
Heat 2 tablespoons of the oil, and fry the paneer until golden brown. Remove from the pan and add the rest of the oil.
Add cumin seeds and asoefetida. Once the cumin starts to change color, add cinnamon, cloves, cardamom and bay leaves. Add the tomato-onion paste and cook for 10-15 minutes, until vegetables are well softened.
Add fennel, chile, turmeric, sugar and salt. Cook another 3 minutes.
Add paneer and garam masala. Cook another 3 minutes.
Serve with rice or roti (Indian flatbread).