Sift the flour together with the baking powder, baking soda and salt into a bowl. Add the sugar, milk, yogurt and knead well into a medium soft dough.
Apply 1 tbsp oil on the dough, cover with a damp cloth and set aside for 1 hour.
Chop onion and mix it with paneer in a bowl. Add salt and red chilli powder and mix well
Grease your palms with a little oil and take a portion of the dough on one palm. Spread the dough with your fingers, place a portion of the stuffing in the centre, gather the edges and seal it well to enclose the stuffing completely and roll into pedas.
Use up the remaining dough and stuffing similarly. Put a little oil on each peda, and press lightly. Keep them aside for 15 minutes.
Sprinkle a few onion seeds over each peda. Dampen your left hand with water, place a peda over it and spread, using both hands, into a round kulcha.
Heat a non stick tawa. Place a kulcha over it with the side dampened with water facing down.
Cover and cook till the underside is golden. Flip, cover and cook till the other side is equally golden.
Serve hot drizzled with butter.