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Default repairing wire insulation inside box

Greetings,

What does the NEC say about repairing damaged wire insulation inside of
a utility box? Is electrical tape acceptable so long as the colours
match? Is heat shrink tubing acceptable? Should I wire nut be used
even if the wire is shortened to only a couple inches instead of the
minimum 6? Is the only acceptable means to re-run the length of cable
between the two boxes? What is legal and what is the best most
accepted way even if it is not strictly legal?

Thank you for your time,
William

PS: Scenario is that a tenant decided to replace an ungrounded
receptacle with a receptacle w/ ground hole (but still without true
ground). Apparently the tenant had the receptacle around but no 2-3
prong converter and no car. They needed the ground plug for a power
strip for the entertainment center they were setting up. The tenant
did not properly pack the wires back into the box and put an outlet
mounting screw through hot wire insulation resulting in a short (but no
damage to the copper within the wire). Yes, yes, I am well aware that
what they were doing is wrong.