The company, which took over the already troubled Bombay Bicycle Club chain, has filed for bankruptcy, according to The Times of India.
"When Shilpa invested a huge sum in the group, the prospects seemed brighter," a source told the paper.
They added: "Apart from not-so-positive reviews from the press, the establishment has also had to deal with monetary issues like debts and loan approvals."
It is claimed that Shetty and her tycoon husband Ray Kundra invested £6 million to grow the modern Indian cuisine chain globally.
The former Celebrity Big Brother winner refused to verify the stories, but admitted that she has moved onto "bigger and better" things since leaving the chain in December 2010.
In February 2011, the actress launched a range of Indian vegetarian meals in collaboration with chef Andy Varma.
> Shilpa Shetty inaugurates spa in Ukraine