Butalia was moderating the session in which nandy made the comments at the Jaipur Literature Festival.
Nandy made a controversial comment on corruption and people belonging to OBC, SC and ST communities which drew a strong response from the audience.
At a panel discussion at the Festival, Nandy said, "Most corrupt people come from OBC, SC and ST communities".
Journalist Ashutosh, who was among the panelists, and most members from the audience took strong exception to the statement.
"This is the most bizarre statement I have heard. The Brahmins and the upper cast can do away with all the corruption but when a low caste person emulates the same thing it becomes so wrong. Such statement is not right," he said.
"Most of the people who are doing corruption are people from OBC, SC and ST communities and as long as it remains Indian republic will survive," Nandy said. His comments were met with boos from the audience.
However, Nandy later clarified that what he meant was that most of the people getting caught are people from OBC, SC and ST communities as they don't have the means to save themselves unlike people from upper castes.
"You catch a poor person selling a black ticket for Rs. 20 and say corruption but rich people with corruption of millions get away," he said.
Speaking at the first session here, on 'Republic of Ideas' which discussed the idea of Indian Republic, author-journalist Tarun Tejpal said corruption is a class equaliser.
"Many people who came from wrong side of society subvert the rules and move ahead using loopholes. That is the only way they have as we made such class barriers," he said.
However, a member from the audience said that "corruption is the most abusive power. We can’t agree to what you said".
Indian Constitution, the panelists observed has tried to do very well to safeguard the freedom of speech by compromising on certain aspects.
Richard Sorabji, an author with around 120 books to his credit said, "Compromise is very important for a Constitution. Indian Constitution tried to do very well with safeguarding of freedom of speech. People should be free to say what they want to say against religion but not with deliberate malice. This is a compromise missing in us".
"America will do well to adopt India's idea of free speech," he added.
Patrick French, whose latest book focuses on India, said that the problems India is facing today are not the creation of Constitution but by problem of bureaucracy.
Talking on the idea of India, he said, which neighbouring country you look upto and say you want to live in it. That's the idea of India. The fact that you can't read does not stop you from voting. It was a great idea of Indian Constitution".
(With PTI inputs)