Start by making the paste. Soak the dried red chillies in boiling water for about 10 minutes to soften. Place the soaked chillies in a food processor or spice grinder and retain the soaking water. Add the remaining ingredients for the paste and blend to a smooth paste adding a little of the soaking water if needed to help it blend. Set aside.
Now rub the chicken all over with the ground turmeric. Both this step and making the paste can be done a day ahead of cooking if more convenient.
When ready to cook, heat the oil in a large saucepan or wok over medium high heat. Add the prepared paste and fry for about 2 minutes or until fragrant. Then add the chicken thighs and fry to brown for a couple of minutes ensuring that the chicken is nicely and evenly coated with the paste.
Stir in the water and fresh, thinly sliced lime leaves and bring to a simmer.
Reduce the heat to medium and simmer the chicken in this sauce for about 20 minutes or until the chicken is cooked through and the sauce has thickened and coating the chicken.
To finish, stir in the coconut milk. This is supposed to be a creamy, almost dry curry but if you prefer more sauce, go ahead and add more coconut milk.
Taste the curry and add salt to taste and sugar if you would like it sweeter. Squeeze the lime juice over the top and serve garnished with a little coriander (cilantro) and finely cut lime leaves. Chicken Kapitan is delicious served simply over white rice or with bread.
