[Backport 7.9] Regression: Image picker via "select image" option is not working as expected

1. Login to CMS (gogreen)
2. Navigate to documents >> go green >> events >> select any document
3. Edit the document >> In Image option >> Click on Plus sign to add new image and Click the button "Select" to add new image via image picker
4. In image picker add new image using "Upload" button option

Actual - New image appears to be broken and below error message is shown in terminal
"[INFO] [talledLocalContainer] 13.02.2015 11:03:02 ERROR [org.onehippo.addon.frontend.gallerypicker.dialog.GalleryPickerDialog$3.onSubmit():151] 458ef1ca-7832-4aae-8da0-af6dc3816404"

When I navigate to Images and folder where above message is uploaded, there also it appears to be broken (refer screenshot)

In step 4, when user attempts to upload large image (>4mb), no error is shown.