Lignite-bearing sequence of the Valia mine, associated with the Cambay Shale Formation (early Eocene) in Cambay Basin of western Indian State Gujarat, has been studied. An integrated approach (including organic petrography, palynofacies, palynology, entomology, geochemistry) has been adopted to assess the origin and characters of lignite deposits and their potential for the hydrocarbon generation, besides to understand the evolution and interaction of different biotic (floral-faunal) groups of the geological time. The studied samples (lignites/shales) are characterized by the domination of huminite group (av. 67 vol.%)/phytoclasts (av. 58%) along with the abundance of short-chain n-alkanes (bacterial activity). The frequencies of detrohuminite sub-group, non-biostructured elements, macrophyte-derived amorphous organic matter (AOM, mainly), and high values of proxy aqueous are indicating the elevated bacterial degradation of the OM and/or also suggest the significant contribution of the herbaceous vegetation/aquatic macrophytes/algal input to the palaeo-peat. The relative abundance of hopanes and low values of the steroids/hopanoids ratios further indicate a high bacterial activity. On the other hand, the contents of telohuminite, liptinite group, and cuticle elements together with the high carbon preference index, low proxy wax, and terrigenous/aquatic ratios confirm both terrestrial and macrophyte contributions during the peat accumulation. Fascinatingly, we have found Dipterocarpus-derived amber (fossil resin) within the lignite seam (lower) with remarkably well-preserved arthropod inclusions consisting of arachnids and insects. Generally, insects have an association with flora and provide important ecosystem functions. In the studied amber samples, the insects to arachnids (spiders and pseudoscorpions) ratio is 3:1. Their quantitative analysis indicates the dominance of the Chironomidae (non-biting midges 32%) followed by Araneae, Myrmicinae, Cecidomyiidae, and Mycetophilidae. A rare entity such as pseudoscorpions has also been found during the investigation.The derived petrographic indices indicate that the peat-forming limno-telmatic vegetation was accumulated mainly in back-barrier settings with high groundwater (mesotrophic to rheotrophic) condition. The contents of pyrite (mainly framboidal) mineral and sulphur (0.69–2.24 wt.%) suggesting that peat had experienced the marine influx. Further, the high occurrence of funginite maceral (among inertinite group), and spores of family Microthyriaceae point towards a warm and moist condition. The plotting of palynofacies data on Tyson's APP diagram, and the values of pristane/phytane ratio suggest that the OM was primarily deposited in dysoxic to suboxic settings. The high incidence of family Chironomidae, non-biostructured and low cuticle contents indicate the proximal settings and a low energy environment like lake/pond or marshlands. However, the occurrence of granular-AOM along with high (relatively) opaque phytoclast contents in the upper part indicates that distal settings were formed at the termination of the OM accumulation. The total organic carbon (TOC) contents and hydrogen index values in the studied samples indicate a good to excellent source for the hydrocarbon generation. However, the low gross calorific value (av. 4467 cal/g), values of Tmax (mostly below 435 °C), and H/C and O/C atomic ratios showing that the samples are of immature (early diagenetic stage; huminite reflectance value: av. 0.28%) nature of the OM. Moreover, the different cross plots (hydrogen index (HI) vs. oxygen index (OI), S2vs. TOC, HI vs. Tmax) indicate that the Valia lignite-bearing succession contains admixed type-III/II kerogen, and can generate gaseous and some liquid hydrocarbons upon maturation or with additional heating.