The Exception is misleading and closing InputStreamReader(System.in) does not allow Console.readLine() to read a line and Console.readPassword() to read password.
For Console.readPassword(), exception message is:  IOError :java.io.IOException: The handle is invalid. See Result2:
Closing InputStreamReader(System.in) should not affect Console readLine(),readPassword() methods.
Please see the following code,Result1.
<code>
import java.io.*;
class TestClose4 {      
  public static void main(String... s){
   Console con =System.console(); 
   try{
      InputStreamReader reader = new InputStreamReader(System.in);
      reader.close();
      String st=con.readLine("%s","Enter a line");
      System.out.println(st);
   }catch(IOException e){
      e.printStackTrace();
   }catch(IOError error){
      error.printStackTrace();
   }
 }
}
</code>
<Result1>
C:\work>java TestClose4
Enter a linejava.io.IOError: java.io.IOException: No such file or directory
        at java.io.Console.readLine(Console.java:236)
        at TestClose4.main(TestClose4.java:9)
Caused by: java.io.IOException: No such file or directory
        at java.io.FileInputStream.readBytes(Native Method)
        at java.io.FileInputStream.read(FileInputStream.java:199)
        at sun.nio.cs.StreamDecoder.readBytes(StreamDecoder.java:264)
        at sun.nio.cs.StreamDecoder.implRead(StreamDecoder.java:306)
        at sun.nio.cs.StreamDecoder.read(StreamDecoder.java:158)
        at java.io.Console$LineReader.read(Console.java:409)
        at java.io.Console.readline(Console.java:348)
        at java.io.Console.readLine(Console.java:232)
        ... 1 more
</Result1>

<Result2>
C:\work>java TestClose4
Enter a Passwordjava.io.IOError: java.io.IOException: The handle is invalid
        at java.io.Console.readPassword(Console.java:302)
        at TestClose4.main(TestClose4.java:10)
Caused by: java.io.IOException: The handle is invalid
        at java.io.Console.echo(Native Method)
        at java.io.Console.readPassword(Console.java:299)
        ... 1 more
</Result2>