Dwarves of Sauron

[The Saucepan Man]

what was Aule doing at the time? I mean he created the dwarves, he loves them probably more than any of the Valar or even Eru, and yet he doesnt do anything?

Finwe is right. Aule may have created the Dwarves, but it was Eru who gave them life, just as it was Eru who gave Men life. So, Aule could no more tell the Dwarves what to do than he (or any of the Valar) could tell Men what to do.