Grind finely small onion, garlic, ginger, coriander seeds and chillies. Mix curds in the ground pulp and keep aside.
Heat ghee in a pan, put in the chopped onions and fry until brown and crisp. Take out with 2 slotted spoons pressing the onions in between them. When tolerably cooled crush the onions and keep aside.
Tie the whole spices - cloves, bay leaf, cardamoms, cinnamon and cumin seeds - in a small muslin bag. Lower this bag of spices in 3 cups of boiling water in a large vessel which should be kept on fire.
Put in the mutton cubes and the ground paste. Make the fire medium and let cook till the mutton is almost tender.
Lift the spice bag with a tong and keep it in a bowl. When it cools, press the bag hard to take out its juice. Discard the bag and add the juice to the mutton that is cooking on the fire.
Add chopped onions, the remaining ghee that is left over after frying the onions and salt to taste.
Cook on medium fire until the mutton pieces are tender. Stir in between 2-3 times to prevent the masala sticking to the bottom and burning as the liquid evaporates.
This mutton korma should not be completely dry or remain like a gravy.