Merovus's loss of holy power was caused by the dark-dependent methods used. And since the monsters were imps, the energy was already dark and thick and needed ways to filter out the energy. Conventional means of absorbing the life energy of a creature and turning it into what were generally called 'experience points' had natural filtering processes.
But the formula that they used was a Dark Dependent one. And this brought a massive amount of dark energy into the body of one who walked as a Paladin.
The light that glowed out of the Paladin was not a good sign. It meant the holy and pure energy cultivated for so long was leaving due to the high darkness. The knight could cultivate as a knight, but the path of a Paladin was practically over. He would have to redo his cultivation as a Paladin.