I have taken latest Selenium Server
which is 2.45.0 from here. Followed the documentation and started the hub with the following command
java -j
After a good amount of research I was able to solve the issue. The command line parameter was wrong since I am using WebDriver
I had to replace
java -jar selenium-server-standalone-2.45.0.jar -role node -nodeConfig DefaultNode.json
with
java -jar selenium-server-standalone-2.45.0.jar -role webdriver -nodeConfig DefaultNode.json -Dwebdriver.ie.driver=.\IEDriverServer.exe
which makes sure I have the driver executable set up in correct directory as well.