I need some clarification on where to put the proposed usability evaluation method in my thesis. Is it appropriate to discuss it in literature review chapter or in research methodology chapter of my thesis?
That depends on your research question/s, but is nearly certain to be part of your research methodology.
If the evaluation is part of proving/disproving a hypothesis, or more commonly assessing the pros/cons of the resultant design in a thesis that aims to develop a system, then the choice of evaluation method (which you'll have to justify) is in effect part of your research methods.
If in your thesis you end up with design X, there are various methods you can employ to argue design decisions you've made and the overall 'success' of the end product. But if the thesis focuses on HCID, I doubt the proposal will get approved without evaluation being a key step.
If your thesis was to devise a new evaluation method, then you would discuss other evaluation methods in your literature review, which would serve as background, critique and rationale to your own work.