Cut chicken into 3-cm pieces, wash well and pat dry.
Combine ingredients for marinade, rub into chicken and marinate for an hour.
Heat oil in a pan, add shallots and fry till brown.
Sprinkle in turmeric and fry for a minute, stirring constantly.
Lower heat, remove shallots from pan and reserve.
Add tomatoes to pan, fry for 5 minutes, remove from pan and add to shallots.
Add green chillies to pan, fry for 2 minutes, remove from pan and add to shallots and tomatoes.
Sprinkle mustard seeds into pan. When they start sputtering, add chicken with its marinade and ¾ cup water. Cover pan and cook for about 10 minutes till chicken is half done and gravy begins to thicken.
Mix sugar with vinegar and stir in with salt and spice paste. Simmer for 2 minutes till gravy thickens.
Add reserved shallots, tomatoes and green chillies. Mix well and continue to simmer for 5-10 minutes longer, till chicken is tender and coated with gravy.