During this part of the story, the word "unctuous" means "excessively flattering or ingratiating". It is used to describe the way Baby Kochamma decides to view the current situation.

Vellya Paapen drunkenly tells Mammachi what he's found Ammu and Veltuha do. Mammachi then tells Baby Kochamma but instead of getting angry or upset, she is happy. Because she see's this as God's way of punishing Ammu and getting revenge on Velutha at the same time. She flatters herself instead.