application/classes/Controller/Picture.php
----------------------------------------------

<?php defined('SYSPATH') or die('No direct script access.');

class Controller_Picture extends Controller {

    public function action_index()
    {
        $view = View::factory('v1/picture/index');
        $this->response->body($view);
    }

    public function action_upload()
    {
        $view = View::factory('v1/picture/upload');
        $error_message = NULL;
        $filename = NULL;

        if ($this->request->method() == Request::POST)
        {
            if (isset($_FILES['avatar']))
            {
                $filename = $this->_save_image($_FILES['avatar']);
            }
        }

        if ( ! $filename)
        {
            $error_message = 'There was a problem while uploading the image.
                Make sure it is uploaded and must be JPG/PNG/GIF file.';
        }

        $view->uploaded_file = $filename;
        $view->error_message = $error_message;
        $this->response->body($view);
    }

    protected function _save_image($image)
    {
        if (
            ! Upload::valid($image) OR
            ! Upload::not_empty($image) OR
            ! Upload::type($image, array('jpg', 'jpeg', 'png', 'gif')))
        {
            return FALSE;
        }
        Upload::size($image,'1G');
        $directory = DOCROOT.'uploads/';

        if ($file = Upload::save($image, NULL, $directory))
        {
            $filename = strtolower(Text::random('alnum', 20)).'.jpg';

            Image::factory($file)
                ->resize(200, 200, Image::AUTO)
                ->save($directory.$filename);

            // Delete the temporary file
            unlink($file);

            return $filename;
        }

        return FALSE;
    }

}

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php.ini
---
post_max_size = 8M
upload_max_filesize = 15M

nginx
--
client_max_body_size 15M;