Special Central Bureau of Investigation (CBI) judge Ajay Kumar Jain also slapped a fine of Rs. 10,000 on him.
The court also handed three-and-half-year jail terms to two other convicts -- C. Sangit and Tali A.O. -- while another convict Mahesh Maheshwari was sentenced to jail for two and a half years.
The CBI sought maximum punishment for Thungon, saying four more cases were pending against him.
However, Thungon's counsel sought leniency saying his client was 68 years old and suffering from low blood pressure and poor eyesight.
The defence counsel said Thungon's wife was suffering from many diseases and had a brain stroke and hence needs constant care.
Thungon and the others were held guilty of criminal conspiracy, cheating by personation, cheating, forgery of valuable security, forgery for purpose of cheating and using as genuine a forged document under relevant sections of the Indian Penal Code and under provisions of the Prevention of Corruption Act.
Thungon, then minister of state for urban development and employment in the P.V. Narasimha Rao government, along with the other accused, was involved in misappropriating money meant for an irrigation project in Nagaland.
According to the CBI, Thungon connived with officials of Nagaland's irrigation and flood control department in placing a bogus order for sausage wire for a project during 1993-94.
Investigations revealed that no wire was supplied to the department but payments were made against bogus delivery.
A case was registered against them on 1998.