To make the batter, mix flour, cornstarch, and salt in a bowl. Add the water slowly to make a smooth batter (batter should be the consistency of pancake batter or dosa batter).
Heat at least 1/2 inch of oil in a frying pan over medium-high heat. Oil should be moderately hot.
Dip the paneer into the batter, making sure it is completely covered by the batter. Then drop the paneer pieces slowly into oil in the frying pan. (do not overlap them).
Fry the paneer in small batches. Fry them turning occasionally until they are very light golden brown. Take them out over a paper towel.
Do same with bell pepper.
For sauce, heat the oil in the saucepan over medium heat; add ginger and green chili. Stir for about one minute. Add all the ingredients for sauce except cornstarch (soy sauce, vinegar, chili flakes, and tomato paste). Stir for 1 minute. Mix water and cornstarch and add to the sauce. Cook for another two minutes, the sauce should be of thick consistency. The sauce gets thicker as it sits.
Add paneer and bell pepper into the sauce and serve hot.