Commercial broiler farms face challenges of extended spectrum beta-lactamase (ESBL)-producing Escherichia coli transmitted from both vertical and horizontal routes. Understanding the dynamics of ESBL-E. coli transmission in compromised biosecurity settings of small-scale rural poultry farms is essential. This study aimed to elucidate the probable transmission pathways of ESBL-E. coli in such settings, employing phylogenetic analysis and molecular docking simulations to explore the catalytic properties of β-lactamase variants. Sampling was conducted on a small-scale poultry farm in West Bengal, India, collecting 120 samples at three intervals during the broiler production cycle. E. coli isolates underwent resistance testing against eight antimicrobials, with confirmation of ESBL production. Genotypic analysis of ESBL genes and sequencing were performed, alongside molecular docking analyses and phylogenetic comparisons with publicly available sequences. Among 173 E. coli isolates, varying resistance profiles were observed, with complete resistance to cefixime and high resistance to amoxicillin and tetracycline. The incidence of ESBL-E. coli fluctuated over the production cycle, with dynamic changes in the prevalence of blaCTX-M-type and blaSHV-type genes. Phylogenetic analysis indicated partial clonal relationships with human clinical strains and poultry strains from the Indian subcontinent. Molecular docking confirmed the catalytic efficiencies of these ESBL variants. The study highlights probable vertical transmission of ESBL-E. coli and emphasizes drinking water as a potential source of horizontal transmission in small-scale poultry farms. Strict biosecurity measures could prevent the spread of antimicrobial-resistant bacteria in birds and their products in a small scale poultry farm.