Using a mortar and pestle, combine the onion, tomatoes, and green chiles until they are mashed into a paste. This can also be done with a food processor. Set aside.
In a large skillet or wok, add the oil and heat over medium-high heat.
Add the cumin seeds and cook for 1 minute until they begin to pop and crackle.
Then add the dry red chili and bay leaf. Stir to heat through.
Add the potatoes to the skillet and saute for 2 to 3 minutes until just starting to soften and brown.
Next, add in the ginger-garlic paste, stir with the other ingredients, and saute for 1 minute.
Add the mushrooms and peas and continue cooking, stirring regularly, for 2 to 3 minutes.
Next, add the onion paste you made earlier, and stir into the mixture so it combines completely.
Add the turmeric powder, red chile powder, coriander powder, garam masala, salt, and black pepper and stir to combine well coating everything. Cook for 2 to 3 minutes.
Add the water to the pot and stir, then bring the mixture to a boil over medium heat. Turn off heat and serve or add cornstarch or additional water to adjust to the thickness you prefer.
Serve over rice or with roti and garnish with fresh coriander leaves and cream or yogurt.