This looks a lot like the opportunistic skin infection I mention every time someone talks about spiny eels. It's very, very common and appears to be related to skin abrasions. It's the prime reason I always say spiny eels should not be kept in tanks with gravel. Water quality may well exacerbate problems, and there's some experience that says adding a tiny amount of salt (about 6-12 grammes per 10 litres, according to Baensch) may be beneficial to spiny eel maintenance in some way, perhaps because it detoxifies nitrite and nitrate. I'm very concerned about the lava rocks used: these are highly abrasive, and would be precisely the kind of thing I'd avoid with spiny eels. You really want to be using floating plants (to stop jumping), smooth sand (for digging), and hollow ceramic ornaments such as pipes (for burrows). While some get away with ignoring these things and doing something else, I wouldn't recommend it.
In any case, once the eel gets to this point, you're dealing with a systemic bacterial infection. In the US, I'd initially go with something like Maracyn, Aquarium Products Furanase, Seachem Paraguard, etc. In the UK your range of options is more limited because antibiotics such as those are only available from a vet. It's worth contacting a vet though and explaining the problem; to be brutally frank, while you certainly could use an antibacterial (eSHa 2000 being my favourite) the chances of such medications working is substantially less than an antibiotic.
The gasping is "merely" a symptom of severe stress, and will go away once the fish is better.
Cheers, Neale
i guess its a good thing.
You know, also the skin around couple of the wounds seems to be a bit swollen. 
