Place onion, garlic and ginger in a food processor and process into a paste. Heat oil in a large skillet over medium heat, add onion paste and saute, stirring continuously, for about 10 minutes.
Stir in the cumin, turmeric, salt, pepper, cardamom, cinnamon, cloves, bay leaves and nutmeg. Saute, stirring, for 1 to 2 minutes. Place chicken pieces in skillet and stir them around with the spice mixture until they are well coated.
Saute for another 4 minutes, then pour in the tomatoes with liquid and stir. Reduce heat to low and simmer for 1 to 2 hours, or until the oil has separated from the liquid. Stir occasionally. (Note: If you simmer uncovered, the sauce will thicken; add water, or keep covered while simmering.)
