Agreed, may be I have seen only bad code. I am still a student and the only industry code that I have seen was in Java. Much of the rest of code, that I saw in academia, was functional in nature and written in C.

I have observed that (may be due to the lack of a review system in academia) the code was much harder to read. With C, the problem was even worse due to extensive use of global variables and poor structuring of code. Java, on the other hand, has two benefits: firstly, it's really strict and verbose. So even if a person is practicing bad coding, it is still harder to make truly unreadable code. Secondly, the IDE are more powerful, makes coding as well as code browsing easier.

My prejudice might be against C and in favor of Java. And i just related it to functional and OO respectively. But I would like to add that modifying objects still somehow seem more intuitive to me - probably because I had a better Java teacher than a C teacher. :)

I think you might be misunderstanding what "functional" means. C is typically considered a procedural and not functional language, even though you do define everything in functions.

Functional programming refers to languages (like scheme and Haskell, and also Ruby and Python) where a function is no different than any other object in memory (like int, char, etc.). It can be returned as a value and passed as a parameter. A function can take functions as arguments and return another function as a result, kind of like taking the derivative or integral in math. (Something like this can be done in C with function pointers, but it's ugly.) Moreover, it's possible to define an "anonymous function", or "lambda". This is essentially an expression that evaluates to a function without a name, the same way you can type (x * y * z) and have it evaluate to a number without having to store it in a named variable first.

Also, you ideally want to define "pure functions", which means functions that return the same value for the same inputs no matter when you call them. These are much easier to debug than code that depends on outside conditions.

When you wrap your head around functional programming, it is actually a lot easier and more sensible in many cases than OOP. Of course, OO is still ideal in a lot of situations, which is why many languages (Python, Ruby most notably) combine the two.

(if you've been in academia, Mathematica is an example of a functional language.)