Combine the chicken with the marination ingredients and keep aside for at least an hour.
Combine the yogurt, ketchup and paste together and set aside.
Heat a saucepan with the oil. Add the chicken peices and fry both the sides for around 3 minutes each till charred. Drain and set aside.
In the same saucepan, melt the butter. Add the curry leaves and green chillies and saute briefly.
Add in the onions and saute till nicely browned.
Add the ginger and garlic and saute till the raw smell is gone.
Add the capsicum, sugar, chilli powder and turmeric and saute till cooked.
Pour the yogurt mixture and cook on high flame for around five minutes, stirring constantly.
Add in the chicken and toss it up well. Add in the water, adjust the salt. Cook on closed lid and low flame till the chicken is well cooked.
Serve with rice or chapathis!