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How can I remove "First Volume"(Macintosh HD) on the disk. Minus sign is grayed out. Unable to remove it via recovery either. Even if I erase the volume, I can't use that space for macOS10.12.1... volume.

Disk

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You can't work on the volume you are booted from. The recovery mode is a minimalist partition at the start of the volume.

Easiest way is to create a bootable USB stick, boot from that.

A second way is to install onto a external hard drive, boot from that, then work on your main disk.

  • I will try and let you know if this helps. – Ankit Chauhan Dec 8 '17 at 2:09

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