Switch on the IP and press sauté mode. After the Instant Pot displays 'hot', melt 2 tablespoons of butter.
Then, add caraway seeds (or cumin seeds) and fry for few seconds. Add roughly chopped green chilies, ginger and garlic, sauté for 30 seconds.
Add cashew nuts and sauté for another few seconds. Add roughly chopped tomatoes and fry 30 seconds.
Then, add bay leaf, cinnamon stick, turmeric powder, coriander powder and red chili powder, mix. Add kasuri methi along with 3-4 tbsp of water.
Cancel sauté mode, cover the pot with lid and turn the pressure valve to sealing position. Press 'manual' or 'pressure cook' and cook for 6 minutes on high.
Once the cooking cycle is complete, carefully turn the valve to venting to do the quick release. Open the pot and discard bay leaves and cinnamon stick.
Blend the masala to a smooth paste using immersion blender. (You can also transfer the tomato cashew masala into a blender jar and blend it to a smooth paste. And then transfer the masala back to the pot.)
Switch on the sauté on low, add 1/4 cup of water, salt and cream, mix well. Cook for 30 seconds.
Add remaining 2 tablespoons of butter, paneer cubes, garam masala powder and sugar. Gently mix and cook for another 30 seconds to 1 minute only.