Add cornstarch, all-purpose flour, red chilli powder, crushed black pepper and salt to a mixing bowl.
Pour water, about 6 tablespoons and begin to mix to make a batter. It should be neither too thick nor too runny. You may add 1 to 2 tablespoons more water if required. The batter has to be smooth without any lumps.
On a medium flame, heat 3 to 4 tablespoons oil in a deep pan for shallow frying.
Add 200 to 250 grams of cubed paneer to the batter. Gently coat paneer with the batter.
Check if the oil is hot enough by dropping a small portion of batter. It must sizzle and come up to the surface without turning brown. This is the correct temperature.
Pick up each batter coated paneer with a spoon and gently slide them in the hot oil. Space them apart from each other, do not crowd. Do not disturb them for a minute or until the batter firms up.
Later stir and fry them on a medium heat on all the sides until crispy. Drain to a kitchen tissue or a steel colander.
Option 1 - For dry chilli paneer : Stir in 1 tsp cornstarch to a bowl and mix with half cup water. Stir well & set aside. To another small cup, add 2 tbsps chilli sauce, 1 tbsp soya sauce, 2 tbsps ketchup, 1 tsp sugar, half tsp vinegar and half tsp red chilli powder (optional). Set this aside.
Option 2 - For chilli paneer gravy : Add 2 tsp corn flour & 1 cup water to a bowl. Stir well and make a lump free slurry. Keep aside. Add in 2 tablespoon soya sauce, 4 tbsp chilli sauce, 1 teaspoon of vinegar, 3 tablespoons tomato ketchup and little more salt & sugar. For color add ¾ tsp red chilli powder. Stir well and set this aside.
Remove excess oil from the fry pan retaining 1 tbsp. Fry one tablespoon finely chopped garlic until it smells good.
Then add in 2 tablespoons of spring onion whites and 1 medium onion cubed & layers separated.
Also add in 1 slit green chili and half cup diced capsicum. Saute on a high flame for 2 mins.
Stir the prepared sauce in the bowl and pour it to the pan.
Next stir the prepared corn slurry and pour it to the pan. Mix every thing & cook on a medium heat till the sauce thickens.
Check the taste of the sauce. You can add more sauces or salt if you wish to adjust to your taste.
If you want to thin down the sauce, just add some hot water to get the desired consistency. Turn off the heat and cool down slightly.
Add crushed black pepper & fried paneer cubes to the chilli sauce and mix. Add the spring onion greens.
Serve paneer chilli hot as a appetizer. You can also serve this with hakka noodles or fried rice.