"This is a special take on a vegetarian favorite of mine. It's made 'dry' rather than with an excessive amount of salt, to be eaten almost as a warm salad dish. It can be eaten on its own as a light lunch or dinner, or as a side dish to a bigger meal."
Mix 2 tablespoons water, red chile pepper, and sugar in a small bowl to make a runny chile sauce.
Mix 3 tablespoons water, cornstarch, pepper, and salt together in a bowl to make a smooth batter. Add paneer; mix until thoroughly coated.
Heat oil in a large skillet over medium heat. Add coated paneer; cook and stir until starting to brown, 5 to 8 minutes. Transfer to a plate using a slotted spoon.
Stir garlic into the skillet; cook until fragrant, about 1 minute. Add onion and green pepper; cook and stir until starting to soften, about 2 minutes. Mix in remaining 2 tablespoons water. Stir in chile sauce, lettuce, hot pepper sauce, soy sauce, and vinegar. Return paneer to the skillet; cook until coated with sauce, about 5 minutes.