A Generic error occurred in GDI+ in Bitmap.Save method

This error message is displayed if the path you pass to Bitmap.Save() is invalid (folder doesn't exist etc).

When either a Bitmap object or an Image object is constructed from a file, the file remains locked for the lifetime of the object. As a result, you cannot change an image and save it back to the same file where it originated. http://support.microsoft.com/?id=814675

A generic error occurred in GDI+, JPEG Image to MemoryStream

Image.Save(..) throws a GDI+ exception because the memory stream is closed

http://alperguc.blogspot.in/2008/11/c-generic-error-occurred-in-gdi.html

EDIT:
just writing from memory...

save to an 'intermediary' memory stream, that should work

e.g. try this one - replace

    Bitmap newBitmap = new Bitmap(thumbBMP);
    thumbBMP.Dispose();
    thumbBMP = null;
    newBitmap.Save("~/image/thumbs/" + "t" + objPropBannerImage.ImageId, ImageFormat.Jpeg);

with something like:

string outputFileName = "...";
using (MemoryStream memory = new MemoryStream())
{
    using (FileStream fs = new FileStream(outputFileName, FileMode.Create, FileAccess.ReadWrite))
    {
        thumbBMP.Save(memory, ImageFormat.Jpeg);
        byte[] bytes = memory.ToArray();
        fs.Write(bytes, 0, bytes.Length);
    }
}