Connecting to Active Active Cluster Services I have a two node active active cluster setup as below: 

NODE 1 
  - SQLINST1 ( with DTC1 )

NODE 2 
  - SQLINST2 ( with DTC2 )

I wish to now have the application connect to SQLINST2 whenever SQLINST1 fails. Is it possible in SQL server 2012. 

Once the SQLINST1 comes backup the connections should reconnect back to SQLINST1
First off, there is no such thing as an "active/active" cluster.  That is a huge misnomer, and can lead to a large amount of confusion.  What you have is two failover cluster instances in a Windows failover cluster with at least two nodes.

Secondly, this will not be possible if you are dealing two failover cluster instances.


  I wish to now have the application connect to SQLINST2 whenever SQLINST1 fails


Which nodes are the possible owners of the cluster group SQLINST1?  I'm guessing both nodes would be able to own the FCI (failover cluster instance)?  If so, it'd be a rather corner-case where both either node is still up, with SQLINST1 down but SQLINST2 is still alive and well (it could happen, just would be a typical failure).

Something you could consider, seeing as you are using SQL Server 2012 is AlwaysOn Availability Groups.  What you could use here (provided that the rest of the functional capabilities meet your implementation requirements:  AGs are a very robust technology) is an availability group listener to act as the client abstraction (it's just a virtual network name within the AG cluster resource group of the WSFC).

It does sound as though you want/need automatic failover in this case.  Unfortunately, automatic failover between a FCI replica and another node isn't currently supported, do you'd need to revert to standalone instances for your AG replicas.  Not necessarily a bad thing, but surely worth thinking about in the initial stages of infrastructure design.