Theory:

     The goldsmith named the merchant, and he was none other than the original owner of the house whose wall had fallen. Now justice had come full circle, thought the king, back to the merchant. When he was rudely summoned back to the court, he arrived crying, “It wasn’t me but my father who ordered the jewellery! He’s dead! I’m innocent!”

     But the king consulted his minister and ruled decisively: “It’s true your father is the true murderer. He’s dead, but somebody must be punished in his place. You’ve criminal everything from that criminal father of yours, his riches as well as his sins. I knew at once, even when I first set eyes on you, that you were at the root of this horrible crime. You must die.”
Explanation:
 
When the king asked the name of the wealthy merchant, the goldsmith said his name. Also, we have seen that "In the kingdom of fools", the narrator did not give any specific names for the characters. He used to address them by their profession.

Then, the goldsmith named the merchant. The merchant was the house's original owner, whose wall had collapsed on the thief's head. Finally, the king believed that justice had completed its journey. It indicated that the story came to an end with the same person who had started it. The thief died below the wall of the same merchant whose jewellery the goldsmith was making. Later, the merchant was rudely called in front of the king once more. He wept as he approached the king, knowing that the king was foolish and would sentence him to death. He claimed that his father had placed the order for the jewellery. Also, he stated that his father was dead, and it was not his fault, and he was an innocent man.

After consulting with his minister, the king concluded that the merchant's father was the murderer. Because of him, the thief died. Since the merchant's father was no longer alive, someone had to take responsibility for his crime. At last, the king declared that the merchant's son, who had inherited everything from his father, would have to bear the consequences. He went on to say that when he first saw the merchant, he had the impression that he was the offender. Later the king said that the merchant would have to die.
 
Meanings of the difficult words:
 
S.No
Words
Meanings
1
Horrible Very shocking and frightening
2
DecisivelyIn a manner that settles an issue convincingly or produces a definite result
3
MurdererA person who commits a murder; a crime
4
CriminalA person who has committed a crime
5
SinAn immoral act considered to be against divine law
Reference:
National Council of Educational Research and Training (2006). Moments. In the Kingdom of Fools– A K Ramanujan (pp. 19-24). Published at the Publication Division by the Secretary, National Council of Educational Research and Training, Sri Aurobindo Marg, New Delhi.