One of the two alleged holdup men killed Saturday by a Bethesda jeweler was a convicted armed robber on a weekend furlough from a District halfway house, authorities said yesterday.

Meanwhile, Montgomery County prosecutors began assembling evidence to present to a grand jury for possible criminal charges against the shop owner who, police said, fatally shot the two men.

"It's a knotty legal issue on how far a shop owner can go," said a county prosecutor, who asked not to be identified. "There is a common law right of a shopkeeper to arrest people who attempt to retain their property or cause bodily harm. But once the people leave the shop," it's difficult to determine where the property owner's rights end.

Donald Shelton, 33, signed out at 7 p.m. Friday from Hope Village, a community correctional facility in Southeast Washington, and was supposed to return by 11 p.m. Sunday, according to D.C. Corrections Department spokeswoman Pat Wheeler.

Around 1 p.m. Saturday, Shelton allegedly held up the Prestige Jewelry Store in downtown Bethesda at gunpoint. As the robber fled with merchandise, store owner Vahag Babayan fired shots and chased him to a getaway car parked on Woodmont Avenue, police said. According to police and witnesses, Babayan ran up to the driver's side of the car after Shelton had entered it and fired on the two occupants.

Shelton, of Southeast Washington, and Steven Jerome Powell, 37, of Northeast Washington, were fatally wounded.

Yesterday, an official in the Maryland Medical Examiner's Office in Baltimore said the two suspects died from gunshot wounds to the chest. The official said that Shelton was shot three or more times and that Powell, who used crutches, was shot at least twice.

Also yesterday, the Montgomery State's Attorney's Office said it will present the case to a grand jury in about two weeks to determine whether "reasonable force" was used by Babayan.

The prosecutor, who spoke on background only, said the grand jury will consider several factors in deciding whether Babayan used "excessive force" that could bring criminal charges. "The law does not endorse or encourage vigilante action," he said.

On Saturday, county police, after consulting with an assistant state's attorney, decided not to file charges against Babayan in the slayings. "We don't want to file charges haphazardly. We want to put some thought into it," a police official said.

Shelton twice entered Babayan's store, police said. The second time, he brandished a .38-caliber revolver and demanded that Babayan open the jewelry cases. After Shelton left the store, Babayan pursued him with a .380-caliber semiautomatic handgun that could fire up to 13 bullets, police said.

Witnesses told police that the suspects did not fire at Babayan, although Shelton pointed a gun at Babayan before speeding away and crashing his Honda Accord into five cars, police said.

Shelton was sentenced to five to 40 years in 1982 on armed robbery, robbery and narcotics-possession charges, according to the D.C. Corrections Department. Last December, he was transferred from a Lorton prison to Hope Village on Langston Place SE, when he became eligible for parole. He was denied parole in March. Staff writer Sari Horwitz contributed to this report.