You don't loop over your entries, thus you never have a data "Instance1" but "Instance1 Instance2". You probably want something as the following:
items=$(grep -0 'ACTIVE\| NOT ACTIVE' output.log | tr -s ' ' )
IFS=$'\r\n'
for it in $items; do
data=$(echo $it | cut -d ' ' -f1 )
status=$(echo $it | cut -d ' ' -f3- )
case "$data" in
("Instance1")
echo "Status for Instance1 is : $status";
;;
("Instance2")
echo "Status for Instance2 is : $status";
;;
"") echo "empty things"
;;
esac;
done