Add the coarsely pounded spices to a bowl. Add the hot and kashmiri red chilli powder. Pour 1/4 cup of warm water, mix the spices into a paste and set aside.
In your dutch oven or any heavy bottom pot with lid, add the oil and let warm up for a few minutes until slightly smoky.
Add the black cardamom, cinnamom stick and bayleaf to the oil and saute for 10-15 seconds taking care not to burn the spices.
Next, add the sliced onions, sprinkle a pinch of sugar and let the onions brown. Keep on cooking them with stirring in between for 7-8 minutes till the onions are dark brown. This is important for color of the stew.
Once the onions are browned, add the lamb to the pot. Cook the lamb on medium low heat with onions for 8-9 minutes stirring continously untill you see that the lamb is browned on all sides and the edges are starting to turn dark brown.
Add the spice paste next, sprinkle 1 tsp of salt and mix well till the lamb pieces are covered in spices. Let the spices cook with lamb and onions for good 5 minutes. Make sure that they are not sticking to bottom. If you feel so, add a tablespoon or two of water.
Slowly you will see that the lamb will release its water and the contents of the pot will be slightly watery. Add 1/4 cup of hot water at this stage and cover the dutch oven.
Let the lamb slow cook for a low stove 2-3 hours(time depends on how big or small your pieces are as well as the quality of your meat). You will need to check time to time to make sure that nothing is sticking to the bottom, if so, add a splash of water.
Once the lamb is 90 percent cooked, keeping heat low, add the beaten yogurt and mix well rigrously else the yogurt will curdle. Saute the lamb with yogurt for 5-10 minutes untill you see oil bubbles on the sides of the pot. Check and adjust the salt at this stage. At this stage, lamb will be 95 percent cooked.
Add the potatoes to the pot, mix and cover the lid again.Let potatoes cook for 5-8 minutes or untill fork tender.
Once the meat and potatoes are done, take off the stove. Add nutmeg and gently mix everything well.
Let the stew rest for 2 hours before serving.