Heat olive oil in a frying pan over medium heat. Saute onion until lightly browned. Stir in garlic, ginger, curry powder, mustard seeds, turmeric, cinnamon, coriander, bay leaf and salt. Continue stirring for 2 minutes.
Add chicken pieces, tomato puree and coconut milk. Bring to the boil, reduce heat, and simmer for 20 to 25 minutes.
Remove bay leaf and stir in yoghurt, lemon juice and chilli powder. Gently simmer 5 more minutes, then serve.