A PhD would be needed at the later stages especially when apply for the Professor or Head of the Department posts. At the initial stages a PhD is not needed.
If you have a Bachleor's degree in Engineering (without any lateral entry), you would be qualified to take up the GATE exams.
Once you have a good score in the GATE exams and you complete your MTech, you please apply for the NET or the SET (National or State eligibility test) for holders of master's degree to become Assistant professors in their respective field.
After this you apply for the post of an assistant professor. Once you join a reputed college and start working as an assistant professor, the next step would be to have 5 years of teaching experience to apply for the post of Associate Professor. Here your PhD would be welcome for any department to consider you for promotion. If you can enroll for a PhD by distance mode, then it would be a practical way up for the further promotions.
IGNOU has PhD in Mechanical Engineering. (http://www.ignou.ac.in/ignou/aboutignou/school/soet/programmes/detail/630/2).
If you are going to take the route of PhD in regular mode and complete all your education, then you would be exempted from NET test but risk being overqualified for assistant professor jobs.
For further details regarding the qualification for assistant professor job, please browse this (https://www.igitsarang.ac.in/Documents/careers/FACULTY_APPLICATION_IGIT_Sarang.pdf).