So, I am running a heroic campaign where a bunch of "god's chosen" people (led by the cleric in the party) are preparing to become the "spear's end" in the war with fiends who plan to invade the kingdom. So the kingdom is human-oriented as well as the whole setting. Elves and dwarves are more independent kingdoms. In general (to cut this short), the world is inspired by Tolkien's but more D&D-ish.
The party is level 5 already. They have a reputation as the heroes in the big coastal city (called New Star). The party consists of 5 players.
The general story tensions right now are:
They need to complete the ritual of "helping" 7 deities (3 out of 7 complete) to become more powerful; they need to do that before the enemy strikes; they don't know the deadline date.
A bunch of cultists figured out that the cleric is a Champion of the Gods and he needs to be killed; so they tried to straight up kill him in the fight; that didn't work; now they are plotting onto him; first they blackmail one of the party members who is in love with one lady; they kidnapped the lady and gave the guy 2 days to kill his own brother!
The party has a dwarf (fighter) and an elven lady (ranger); humans are really interested in what the others (other races) are planning on doing in this war; can these two be a diplomatic force that will rally troops to help the human kingdom;
But... For some reason my elf lady and the party's rogue decided to rob a jewelry store. And they failed so hard that it's insane. So they kill (straight up kill!) the owner after the rogue fails a few 'ruse' checks because they (the player) were frustrated by this. Then they both try to kill the guard of the jewelry (a mercenary), who escapes and goes straight up to the city watch. So the elf and rogue decide, "Ok, we didn't plan to kill the guy, but if he is dead, let's take what we can!" They take a huge amount of jewelry and run through the backdoor into the streets before the city watch arrives.
What is my problem with all of this? Meanwhile, the 3 other players' characters were doing some heroic stuff trying to do good for people. The whole party were invited to the City Council this night! They are heroes! The city loves them! They helped the city a lot (we started at level 1; and every quest was to help others). And now this...
I need some advice. Because so far I see the city administration just executing these two magnificent bastards (Bonnie and Clyde). Is it okay to just sentence your players' characters to death by the law?
My players and I are ok (we talked about it on session 0) with NPCs being smart. The party messed up, and messed up big. It is only a matter of time until smart NPCs figure out who killed the guy and who robbed the jewelry.
My main problem is that I don't wanna kill these PCs, but if I don't, players will think I just went easy on them. I don't have ideas how to gently rule this one situation out.