Can Factory Reset delete a virus? In my Lenovo A536 phone a malicious app that is alarm controller and calendar service is unknowingly installed and it is creating a problem. 

I am not able to uninstall the app as it is automatically stored in in-built app. 

So can Factory Reset remove it?
If the app has installed itself as a system app, then no, factory reset will not remove it. It will just wipe it's data, but it will start installing again, after you boot your phone up.

You will need to flash your device with a stock firmware file, which does not have the virus installed.

You can follow this tutorial:

http://forum.xda-developers.com/android/general/tutorial-how-to-flash-lenovo-a536-stock-t3300818